Texas Cattle Feeders Assn.
Joins NCBA Pricing Position

AMARILLO — The Texas Cattle Feeders Association is joining the National Cattlemen’s Beef Association in opposition to mandatory live cattle price reporting.

Many TCFA member feedlots are engaged in formula trading and other arrangements whereby pricing information is withheld. Some of those arrangements would be outlawed by mandatory price reporting legislation under consideration in Congress.

Instead, TCFA says it will support NCBA’s plan to seek improvements in voluntary live cattle price reporting, while working for legislation to establish mandatory price reporting for boxed beef and import-export beef.

"With the cattle market in the shape it is, it's only natural for cattlemen to look real hard at any idea that might bring relief sooner rather than later, and mandatory price reporting for live cattle is one of the ideas that has been given lots of attention," says Jim Gill, market director at TCFA.

Mandatory price reporting is not a panacea, Gill warns.

"There is no silver bullet in the cattle market," Gill says. "We're dealing with cyclical forces, low grain prices, changing consumers and a difficult global economic situation. If time heals wounds, it also is the best antidote for a sick cattle market. No one single action, such as mandatory live cattle price reporting, will solve all the issues facing cattlemen."

Gill contends that mandatory live cattle price reporting may actually create more problems than it solves.

For a price reporting system to be successful, he says, it must capture how all cattle are sold; accurately report all cattle sales; be based in legislation; be funded, probably by user fees passed on to cattlemen; be timely and usable for both daily spot and grid markets; enjoy consensus and confidence among all segments of agriculture; be under government control for data collection and enforcement; cover all data collection points, including private treaty sales; be flexible over time; and have sufficient penalties and investigative authority to be enforceable.

If mandatory price reporting became reality, it's likely that a new government bureaucracy would be created, says TCFA’s Burt Rutherford.

"USDA doesn't have the manpower to collect additional data and does not have the injunctive powers required to enforce a mandatory reporting system," Rutherford says. "That means any new program will have to be funded, most likely through user fees paid by cattlemen."

USDA estimates it will cost at least $60 million just to monitor for compliance.

To enforce mandatory price reporting, individual business audits would have to be done by the new bureaucracy to determine if all sales are being reported. That means the federal government would have the right to come onto farms, ranches or feedyards and have complete access to all financial records, Rutherford says.

To ensure participation, a schedule of fines and penalties would have to be legislated, they would have to be severe enough to get everyone's attention, and enforcement would have to be rigorous enough to be noticeable.

"Cattlemen have long enjoyed operating their businesses in an environment that is relatively free of direct government intervention," Rutherford says. "Turning that situation upside down is not a very palatable idea to most cattle producers."

Mandatory live cattle price reporting would also likely create a downward bias in prices, TCFA claims.

A 1995-96 study conducted in Texas by USDA’s Packers and Stockyards Administration over 66 weeks found 52,000 cattle that were sold and not reported which traded above the reported USDA daily high. It also found 400,000 head sold and not reported that were below the USDA daily low.

Although there may be ample reason these cattle sold at a discount — they may have been plainer cattle, heiferettes or roping steers — it probably would not benefit cattlemen to force reporting of these sales, Rutherford contends.

Alternative marketing methods are now a fact of life in the cattle business, he says. Forward contracted cattle are often committed but not priced for weeks or months ahead of time. If these prices were reported when they were set, they would be meaningless in relation to daily cash prices. Similarly, mandatory price reporting for formula cattle would be rather useless in analyzing daily markets since there would be at least a week's delay before the price is actually set and reportable.

As more and more alliances develop, especially those that involve the retail sector, determining live cash prices will be even more delayed, TCFA predicts. In fact, with a feeder-retailer alliance, a live cattle price may never be determined.

Under NCBA policy, if voluntary live cattle price reporting proves insufficient by 2000, NCBA could develop a mandatory price reporting policy and develop legislation that defines who must report and what classes of cattle to report.