The new report assesses the Senate bill on animal husbandry

A recent report from Center for Agriculture and Food and PolicyAFPC, y University of Texas A&M evaluates the proposed 2021 Cattle Price Detection and Transparency Act, known as Senate Bill 3229, and its potential impact on beef and cattle supply chain segments.

A recent report by the Center for Agricultural and Food Policy assesses the potential impact of the 2021 Cattle Price Detection and Transparency Act on aspects of the cattle and beef supply chain. (photo by Texas A&M AgriLife, Kay Ledbetter)

He was the lead author of the report Texas A&M AgriLife Extension Service economist Justin Benavides, Ph.D. Texas A&M AgriLife Research and Expansion Center in Amaryll. The staff included AFPC co-directors Bart Fisher, Ph.D., and Joe Outlaw, Ph.D., as well as AgriLife Extension economist David Anderson, Ph.D., all from Bryan-College Station.

“This report consists of two parts,” Fisher said. “The first is an analysis of the impact of the bill on the agreed volume of trade. The second is a high-quality, economically based summary of the expected effects of the bill. “

The report presents the expected effects in a matrix format, highlighting the expected targeted impact of each part of the bill on a number of stakeholders and market outcomes, including cattle and beef prices, market transparency, price detection and data confidentiality.

Help to report

In November, a bipartisan group of U.S. senators announced a compromise proposal in the cattle market, which was introduced as the 2021 Cattle Price and Transparency Act.

Senator John Buzman, R-Ark., Member of the rankings, Senate Committee on Agriculture, Food and Forestryasked the AFPC to assess the potential impact of the bill on different segments of the beef and cattle supply chain.

“The report is based on work published by AFPC in October 2021 at the request of the bipartisan leadership of the House of Representatives Committee on Agriculture at the 116th Congress, ”Fischer said.

What will Senate Bill 3229 do?

Buyers at a cattle auction
Buyers at a cattle auction. (Photo by Texas A&M AgriLife)

“The bill proposes to set a regional mandatory minimum threshold for the percentage of cattle purchased through conditional netting or conditional pricing,” Benavides said. “He also proposes to create a contract library for cattle and expand the requirements for reporting on prices and slaughter of cattle.”

The bill establishes regional mandatory minimum thresholds for contractual cash and network bidding based on the average trade in the region for 18 months. The National Livestock Breeders Association expressed concern about the agreed minimum part of the bill as well Federation of American Farmers’ Bureaus.

To determine whether the proposed minimum and maximum limits of the bill impose economic costs on the cattle market, the authors set an unlimited forecast of conditional trade for various regions of the United States for cattle production – Texas-Oklahoma, New Mexico, Kansas, Nebraska and Iowa. .

In each region, they modeled the expected agreed trade as a function:

• Trend in negotiated trade.

• Has the year of the cattle cycle increased or decreased the size of the herd.

• Seasonality of historical trade.

• Conditional trading volume for the previous week.

• Total weekly cattle trade.

The criteria also included an ideological variable that took into account the introduction of an industry “75% plan”.

“The difference between the expected volume of unlimited bargaining and the amount of bargaining forced by Senate Bill 3229 gives a measure of the value of the provisions of the Bargaining Bill,” Benavides said.

The report contains figures showing the expected unlimited agreed trade compared to the agreed trade lows stipulated by the bill, by December 2026, over a five-year period.

The authors also considered whether changes in the scope of negotiations would bring value.

“Typically, moving away from alternative marketing mechanisms or AMA results lose effectiveness,” Anderson said. “This loss of efficiency results directly in an increase in the transaction costs of buying and selling cattle.”

Anderson said industry research also shows that packers who work with the AMA tend to have lower marketing costs.

“Reliability of supply is a critical component in the operation of a large packaging plant, and industry research has shown that plants with higher AMA volumes have more stable average monthly volumes,” he said. “And the increase in costs from the mandatory reduction in AMA use will be borne by the cattle feeding sector.”

Benavides noted that the report also shows that the region, which includes Texas, will have the greatest negative impact from the introduction of mandatory trade minimums.

Expected effects from the bill

The report also presents a matrix of expected effects of the bill on its three main segments:

  • Agreed Trade Mandate – Conditional levels of agreed trade are expected to have a negative impact on short-term prices for cattle and calves.
hand holds a package of meat in the supermarket.
The report notes that while the bill will increase price detection, it will mean lower prices for cattle producers and higher prices for beef consumers. (Photo)

“Agreed trade mandates provide additional price detection and market transparency, but more price detection does not mean that cattle prices will be higher,” Benavides said. “The mandate will lead to a reduction in short-term cattle feeding prices due to increased costs for a cattle sale transaction with supplies.”

Benavides said the bill does increase price detection, but costs lower prices for cattle producers and higher prices for beef consumers.

  • Contract Library. The effects of a contract library will be felt solely in terms of market transparency, as such a library will increase market transparency.
  • Extended reporting requirements – Expanding reporting requirements will affect two areas, transparency and detection, and is likely to increase both.

“Overall, in terms of the impact of the bill on different segments of the beef and cattle supply chain, the result is that there will be trade-offs,” Fisher said. “While this can achieve greater price detection and market transparency, deviating from the AMA through regional mandatory minimums for line purchases will lead to lower cattle prices and higher wholesale and retail prices for beef.”

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