Farm Bureau Sticks with Status Quo and Refuses to Back Cattle Market Regulations

By Mackenzie Johnston

The American Farm Bureau Federation (AFBF) is a nonprofit, nonpartisan organization that claims to promote, protect, and represent the interests of U.S. farmers. With over five million members, AFBF is the largest U.S. farm organization. The organization’s convention was recently hosted in Atlanta, GA January 7-12. During convention, AFBF voted to support the Cattle Price Discovery and Transparency Act of 2021, but only if the biggest element in the bill is excluded- the establishment of mandatory minimum negotiated cash sales for fed cattle.

Cash sales are simply sales made from buyers placing bids on cattle. Formula pricing, also referred to as alternative marketing agreements or AMA’s, are sales made through confidential contracts with beef packers. The formula price is based on the current cash cattle price. As fewer and fewer cattle are sold in the cash market the cash price becomes less representative of the overall market for cattle. It also becomes easier to manipulate especially since there are fewer and fewer packers competing/ bidding for cattle.

The Cattle Price Discovery and Transparency Act, also known as the compromise cattle market proposal, was proposed in November by Senators Chuck Grassley (R-IA) and Deb Fischer (R-NE) and cosponsored by 14 other senators from both sides of the aisle. Senator Grassley has been an advocate for independent cattle producers since the beginning of time and this bill was introduced in hopes of returning fairness to the cattle marketplace dominated by our four large meatpackers, aka the big four. 

Due to a lack of cattle being sold negotiated cash, the fat cattle market doesn’t have enough representative sales to truly establish the value for cattle any given week. The industry has observed negotiated sales slip away through the years. In the Texas/Oklahoma/New Mexico cattle region, from 2005 to 2018, there was a 40% decline in cash sales. During the same period in the Iowa/Minnesota region, cash sales fell by 16%. 

According to AFBF data, in the mid-2000s, about 50-60% of fat cattle were sold using negotiated trade with about 30% sold using formula pricing. Nowadays, formula pricing is the most common way to sell fat cattle, with 60-70% of fat cattle being marketed with AMA’s and only 20% on the cash negotiated market. AFBF has put together committees to investigate cattle market issues such as this in the past two years, however nothing has ever came from those efforts.

AFBF supports robust negotiated sales, but delegates at their convention believe this should only be achieved voluntarily, exemplified by their position against a government mandate. About a year ago we saw NCBA come out with their 75% plan to increase negotiated sales voluntarily and that failed miserably. If AFBF supports a strong fat cattle cash market, I would like to hear how they believe the industry can successfully achieve that without setting minimum percentages for the packers to adhere to. Do they think the best solution to remedy our broken cattle market is to ask the packers to fix it voluntarily? Keep in mind the packers have experienced record profits for the past two years. Just in 2021 they saw average profits of over $600/hd. Why would the packers consider changing anything when they’re making out like bandits?

A total of 345 delegates voted at convention, and Texas’ 28 delegates were able to tip the scales in opposition of a government mandate, which comes as no surprise since Texas is known for rarely participating in the spot market. Other states that spoke out against mandated cash trade were Oklahoma, Kansas, and Montana. A few of the states in favor included Nebraska, Iowa, and Missouri.

According to Texas Farm Bureau President Pat McDowell, studies have shown that a government mandate to increase negotiated cash trade would hurt cow-calf producers. Research done by experts in the industry convinced his state delegates to vote the way they did.  

One of those so-called experts, Colorado State University economist Stephen Koontz, spoke at the convention. According to Koontz, formula pricing on cattle is worth $25/hd. to both feedlots and the packers. If our industry were to reduce alternative marketing agreements, it would lower calf prices by $50/hd. Koontz went as far as saying that having more packers to bid on cattle won’t raise cattle prices, such an idea is baloney. He also stated that during the height of the pandemic, packers showed restraint when they kept fat cattle prices between $90 to $100/cwt, when in all actuality they could have taken the market all the way down to $65/cwt. 

Stephen Koontz is quickly becoming NCBA’s go to “expert” for fighting against beef packer regulations. They relied heavily on Koontz’s research when they formulated their unsuccessful 75% voluntary plan. It’s disappointing that AFBF is so narrowminded that they can’t invite a middle of the road economist to speak at their convention to tell the other side of the story, the side that explains packer profits being astronomical while consumers are being gouged at the meat counter and cattle producers are dealing with a market that continues to underperform.

The Cattle Price Discovery and Transparency Act was watered down when it was first introduced, so for an agriculture organization like AFBF to attempt to take out the most important aspect of the bill, increasing negotiated cash trade, exemplifies just how disconnected they truly are to independent cattle producers and the issues facing our industry. AFBF is the most influential agriculture voice in DC and through the years they’ve sat back and watched the chicken and hog industries succumb to vertical integration. Additionally, they’ve also sat on the sidelines while the big four meatpackers went from controlling 36% of the cattle market in the 1980s to currently controlling 85%. Their track record shows that they would rather remove any sort of restrictions on beef packers instead of working to find solutions to help their own members stay in business.

If AFBF continues to turn a blind eye to the cattle industry’s broken market, the organization will die a slow death one member at a time as farmer and rancher members go out of business. In time, they will be nothing more than a pile of cash from insurance company profits.

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Mackenzie Johnston raises Red Angus cattle on her family ranch near Milburn Nebraska. She has a daily video series, Cattle News Central, where she reports and comments on the news of the day in the cattle industry. Follow her here, Cattle News Central