According to a letter to members of the President of the National Cattlemen’s Beef Association, Jerry Bohn, no triggers were triggered in the volume silo traded during the second quarter, which means there will be no regulatory or legislative solutions for the moment. Even so, Bohn said some packers were slow to participate.
“Using data collected as part of mandatory livestock reporting and released by the USDA Agricultural Marketing Service, the subgroup found that no minor triggers were triggered in the silo of trade volume traded in the second quarter. So far, we have not achieved our goal of completing the packer participation silo. However, I am happy to report that we have now finalized agreements with the four main slaughterhouses to analyze their participation in the negotiated market starting in the third quarter. The completion of the conditioner participation silo brings the total number of minor triggers in our program to eight – one for each of the four livestock growing regions analyzing negotiated trade volumes and one for each of these regions analyzing purchases. negotiated conditioners. Addressing this essential part of our voluntary effort will help ensure that buyers and sellers of live cattle take mutual responsibility for achieving solid price discovery. “
When the first quarter traded trade data was evaluated, a major trigger was triggered. According to the framework approved by the members, if another major trigger is triggered during another quarterly assessment, legislative or regulatory action will be pursued.
According to the NCBA, as part of the “Negotiated Trade” silo of the 75% plan, a minor trigger is assigned to each region. The subgroup assessed the weekly trade volumes negotiated for each cattle-growing region and determined that the Iowa-Minnesota and Nebraska-Colorado regions exceeded their thresholds under the 75% plan during all reporting weeks, thus exceeding their traded trade threshold for that quarter. . They also found that the Texas-Oklahoma-New Mexico and Kansas regions did not meet the threshold for five of the first quarter’s reporting weeks. One of those weeks occurred during winter storm Uri and another coincided with the mandatory maintenance of a major packaging plant, resulting in a long shutdown. Both events disrupted normal livestock flows and ended critical packing capacity. Data from the weeks surrounding the two events warranted invoking the force majeure provisions of our framework, although a major trigger was still triggered due to a lack of participation from packers.
Bohn said the second quarter saw a striking level of buy-in from livestock producers and, mainly due to cattle feeders, particularly in the southern plains, the second quarter saw more negotiated market participation than the first. Some slaughterhouses, he said, have expressed a desire to work with us to increase their purchases of traded cattle, and seem to recognize the importance of price discovery for the entire industry.
“That said, the NCBA has been frustrated by the apparent lack of urgency shown by some of the biggest buyers of fed cattle,” Bohn said. “The sub-group believes that the completion of the packer participation silo will encourage all major meat packers to be part of the solution to this problem. “
The sub-group met in Denver on July 6 and discussed the results and some of the lessons learned, including how livestock marketing varies so dramatically from region to region, especially in terms of quality or percentage of dressing.
“Second, it’s important to remember that price discovery and pricing are different things,” Bohn said. “For example, in four weeks of trading in the second quarter, trade volumes traded exceeded robust price discovery levels in all regions. Nevertheless, cattle prices did not register significant gains during the same period. High livestock supplies and a shortage of adequate beef packing capacity have helped create a current market dynamic where the influence in negotiations resides with packers.
In addition, he said that the use of non-value-added formulas, such as weighted averages, “cash plus” transactions and “high-end” transactions, neither contributes to price discovery nor to the pursuit of price. our goal to increase the real trades traded in the market. The subgroup also noted the need for additional research and academic literature to better understand the role of competition, or involvement of packers, in discovering price and cost industry-wide volumes. negotiated reduced.
He admits there are no quick fixes, but work continues to ensure that every segment of the industry can be profitable.