Who Wants to Watch the Packers Squirm?

Me! Me!
Me! Me!

Next week will be a good one for folks with good internet access and a few free hours who want to see some rhetorical fireworks about cattle price discovery.

Me! Me!

The Senate will enjoy a hearing on the Cattle Price Discovery Act.*

And the House ag committee will have “a panel of ranchers to hear what consolidation in the beef industry has done to their bottom lines and viability” and then get a chance to berate the CEOs of the four big packing companies about their culpability in the morass described by the “ranchers.”

Neither committee has yet told us who, besides the processor honchos, will testify. But it’s not too early to think of a few questions.

Chuck Grassley when asked what he would ask the packer CEOs, said, in that punctuation-free way of talking he has, “I would ask them to comment on what they think about our legislation.**I know what they think about it. What they think about it is everything’s alright. Nothing needs to be changed. The cozy relationship they have with the big feedlots of Texas, Oklahoma, Kansas and Colorado filling up about 85% of the chain kill every day is a cozy relationship for them and they don’t want to mess around with the family farmers of Iowa and how come they don’t think our bill is a legitimate answer to the problems that Iowans don’t get a fair price and they sometimes have to wait 30 days to deliver their cattle.”

Which is more statement than question, but that is the way of congressional hearings, isn’t it?

My biggest question for those guys involves the fire behind the smoke raised by that JBS settlement for price fixing. As I said earlier, it makes me very suspicious.*** I want those CEOs, while swearing (under oath this time), to tell us what they know about why the plaintiff lawyer in that case called it an ice breaker that could lead to more information later.

Describe how the price spread exploded so quickly after the pandemic started? Isn’t it unusual for the spread to react so quickly? How did you, Mr. CEO, first learn that cattle feeders were puking like prom dates?  How did you first hear that there was a buying frenzy at the beef counter?

Did anybody in your office suggest you and your competitors were creating a public relations nightmare? While discussing the buy-sale equation, did anybody in your company suggest you could take a smaller profit, either by paying more to charging less, given the public panic at the time? Oh, and would you mind telling us how your annual bonus went the last couple of years?

Then, after I made sure the reporters heard that, I’d dig into what we should do as a government.

Tell us about how your production costs have been affected by the pandemic. Wages? Transportation? How much of these wider spreads are due to such costs? How permanent do you expect those added costs to become?

How do you determine which feedlots are offered Alternative Marketing Agreements (AMA)? How do those agreements differ from your arrangements with contract fowl and swine producers?

Would it be wise for Congress to forbid further concentration or even break up the big four? What sort of added efficiency does such concentration bring?

Do you oppose Sen. Grassley’s Cattle Price Discovery and Transparency Act? How would it impact your business? How would it impact cattle feeders? How would it impact beef prices at retail?

Do you offer any feedlots or feeders contracts based on cutouts? How feasible is that idea?

Oh, yeah. I almost forgot.  What do you know about the plaintiff allegations in the JBS case? Why do you think the plaintiff’s lawyers called the settlement an “ice breaker?” Do you know of any evidence that anybody in your company conspired with other companies to coordinate pricing?

For the “panel of ranchers,” which I presume will include cattle feeders large and small, I’d have a different set of questions.

I’m guessing—just guessing—that most of that group will have troubles to report and packers to blame. So I’d have to start with, “There is overwhelming agreement among academicians who have studied the matter, that there is no need for mandating cash trades. And that imposing them would have no or minimal or even negative effect on cattle prices or beef prices. What evidence do you have that such mandates will influence prices? No ‘well, once upon a time’ cause/effect inferences. I want some stochastic stuff.”

Do you think cash trade is the only way to get fair price discovery for cattle? Can you name other industries that still rely on “just in time” cash bids for raw product? Can you name any in which the government requires such arrangements?

You’ve mentioned, several times,**** that  many cattle producers have gone out of business in recent years. As have many farmers and local store owners and filling station owners and house builders and plumbers. How strong is the correlation between cattle prices and that exodus? Is it stronger than the correlation with drought and rangeland conversion?

Do you think processors should have the right to reward suppliers for quality and reliability of supply? Do you think a packer should be required to pay small producers the same price as large producers or should they be allowed to offer volume discounts?

I see. So if that is unfair, do you think it is fair that auction buyers and order buyers about always pay more per-head for large lots of uniform cattle than they pay for small lots?

And, Oh, yeah! Have you heard anything about the evidence in that JBS price fixing deal? Got any ideas why it’s a state secret? We’ll accept unconfirmed rumors, by the way. We might ask the packers about them later.

Given time, I believe I’d come up with more questions. But that’s where I’d start. Having watched too many congressional hearings, I’m guessing we’ll hear more platitudes about family farmers and greed from the dais than genuine questions or helpful answers. But that’s just the cynic I’ve learned to be through my years and years of watching congressional hearings.

*The one with the mandated cash trades. It’s quite controversial with the beef industry, you know.

**The Cattle Price Discovery Act, that is. It’s quite controversial.

***Another look at me considering that JBS settlement.

Jack Elam 2




****Just guessing there will be some of that expressed.

**Most of the members the ag committees are not from cattle country. We should offer them questions I haven’t thought of. Send me your thoughts to Scornett9163@yahoo.com


Related Stories:

Speer: I Do Not Think It Means What You Think It Means

R-CALF Says New Studies ‘Validate’ Calls For Market Reform

Cornett: The Mandaters Move On

Senators Revise Cattle Price Discovery and Transparency Act

Potts: Supply, Demand Balance Without Government Intervention

Cornett: A ‘Hard Cull’ On The Facts

Packers and Allies Urge Congress to Do Nothing in Face of Broken Markets

Speer: Policy Makers Should Just Leave Well Enough Alone


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