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Senate committee approves two livestock marketing reform bills

The Senate Agriculture Committee quickly approved legislation on Wednesday that would require meatpackers to buy a portion of their slaughter cattle on the cash market — a step intended to ensure fair prices — and create a USDA special investigator to enforce fair-play rules in the highly concentrated meat industry. The National Farmers Union said action on the bills was a sign of momentum “towards fairness for farmers” after years of unrest among producers.

The House of Representatives passed a companion meat investigator bill, HR 7606, last week on a 221-204 roll call, with most Republicans voting against it as “more cops for cows.” The price discovery and meat investigator bills are the most significant livestock reforms to advance in Congress this session.

“Getting this legislation through committee is a big deal,” said Sen. Jon Tester of Montana, a sponsor of both bills, which were cleared for floor debate by voice vote. However, five committee members voiced reservations or opposition to mandatory cash purchases of cattle. There were murmurs against the meat investigator as well.

Cash sales are popular in the Midwest and northern Plains, while so-called alternative marketing arrangements (AMAs), such as formula pricing and contracts for delivery, are common in the Southwest and southern Plains. Groups such as the National Cattlemen’s Beef Association say AMAs “provide stability to producers” and allow them to earn a premium for high-quality beef.

“What I fear are the unintended consequences,” said Sen. John Boozman of Arkansas, the senior Republican on the Agriculture Committee. “If we insert the federal government into day-to-day business decisions, repealing that heavy hand of the government is nearly impossible.”

“I understand the value of AMAs. They can provide economic returns and operational efficiencies,” said Nebraska Sen. Deb Fischer, a sponsor of price discovery bill. “However, AMAs rely on the negotiated market” to help set prices, and the cash market was becoming too thin.

As an example, the USDA national slaughter cattle report said four of every five of the 56,157 head marketed on Tuesday were sold under formula pricing. The remaining 11,283 head were sold on the cash market or at a negotiated grid price.

The price discovery bill, S 4030, calls for the USDA to divide the nation into marketing regions and set a minimum level of purchases that must be made on the spot market, through a negotiated grid, at a stockyard, or through trading systems with multiple buyers and sellers. “These pricing systems will ensure robust price discovery,” said Fischer’s office. Large packers would face a penalty of $90,000 if they fail to meet their purchase targets.

In addition, the bill would create a cattle contract library so producers could compare terms being offered, and would require packers to report how many cattle are scheduled for delivery to them each day for the next two weeks. Proponents say the information would help independent producers choose the best day to send their cattle to market.

The meat investigator bill, S 3870, would create a new office, reporting directly to the agriculture secretary, with the task of enforcing competition law. It would be headed by a career USDA employee and would have subpoena power. “Anticompetitive behavior in the meatpacking industry hurts both consumers and producers,” said Sen. Mike Rounds of South Dakota. “It’s long past time to address this problem.”

Foes oppose the meat investigator as duplicative and a sure source of partisan meddling with the USDA in the midst of revamping fair-play regulations so producers have more leverage with processors. The Justice Department and the USDA’s Packers and Stockyards Division are already on the job of enforcing antitrust laws, they say.

To watch a video of the Senate Agriculture Committee’s 35-minute meeting, click here.

For a summary of S 4030, click here.

For a one-page explanation of S 4030, click here.

Produced with FERN, non-profit reporting on food, agriculture, and environmental health.
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