Dittmer: NCBA hashes out negotiated cash marketing

Free Market Reflections with Steve Dittmer

The last year’s events had converged by this year’s NCBA mid-year meeting, ensuring drama for the Live Cattle Marketing Committee meeting.

Folks from across the country and all industry segments were disturbed about market disruptions from the Tyson fire; market disruptions, processing problems and shutdowns due to COVID-19; government market investigations and the reintroduction of Senator Chuck Grassley’s (Republican-Iowa) mandatory negotiated cash bill.

Optimistically, all the uproar could force some action on increasing fed cattle negotiated cash selling. To some folks, the bad thing could be NCBA coming out in favour of a mandatory cash procurement percentage on all the major packing plants. NCBA has always been a free market organization fighting government intervention in the beef industry. Support for mandatory cash percentages would be a watershed change.

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With COVID-19 restrictions on Colorado meetings, the meeting rooms were split. Roughly 100 cattlemen and cattlewomen with voting cards were in the main committee room and another 80 in the overflow room. Over a dozen NCBA affiliate state and breed groups participated via the internet, monitoring the session, commenting and voting. For such a hot topic, everyone stayed cool and courteous. Chairman Stephen Sunderman, Nebraska, made sure everyone got their chance to speak. A professional parliamentarian minded the procedure.

Both well-known and relatively unknown folks from all types and sizes of operations and varying geography gave opinions. Amendments, and amendments to amendments, were forwarded during the first couple of hours, with a string of roll call votes. Two major resolutions were eventually introduced, discussed and amended until several hours in, both amended resolutions were similar. Both acknowledged the industry situation; the intent to utilize the research and data available; the quest for more transparency faster; and that some action was needed soon.

The overriding bone of contention came down to one word — legislation. There was a sizable contingent that felt only legislation would get the industry off the dime and boost the roughly 20 per cent of fed cattle being traded negotiated cash. Some admitted that getting government involved could be dangerous. But they felt their backs were against the wall regarding long-term viability. Others seemed confident that the industry could remain in enough control of congressional legislation. Their resolution called for NCBA to pursue legislative or regulatory action.

The other contingent remained opposed to government intervention, contending it was against historical industry philosophy, dangerous to encourage political access to industry workings and would forcibly remove a marketing tool for some cattle producers. They wished to pursue intermediate, voluntary steps to boost negotiated cash markets.

NCBA’s February 2020 convention had created a task force that had been meeting on a frequent, regular basis. Besides evaluating and discussing data, consulting with researchers like agricultural economist Stephen Koontz from Colorado State, they also created two subcommittees. One subcommittee examined the potential of the “bid the grid” concept, with the base price of any formula transactions publicly reported by USDA to increase the price discovery database. Another looked at the market maker concept used by other stocks and commodities.

In all the earlier roll call votes on amendments, the vote count opposing government intervention had prevailed but by relatively narrow margins. Neither of the base resolutions as amended had come to a final vote as the meeting neared the four-hour mark on this one agenda item. The chairman then called for a recess, apparently to provide opportunity for some sideline negotiating.

The close earlier votes had indicated the folks opposed to government intervention were likely to prevail in a head-to-head vote but there would be many very unhappy people in the organization. The sideline negotiators apparently came to believe a compromise that did most of what both sides wanted but with some teeth to propel action was needed.

After roughly five hours of vigorous debate and parliamentary work, the committee, and subsequently the board of directors, was able to pass a resolution unanimously.

The critical resolution clause was that NCBA supports a voluntary approach increasing “frequent and transparent negotiated trade to regionally sufficient” levels, to “achieve robust price discovery determined by NCBA-funded and -directed research in all major cattle feeding regions.” The other key element was cash trade “triggers to be determined by a working group of NCBA producer leaders by October 1, 2020.”

The resolution also specified that if the voluntary approach does not achieve robust price discovery and meet the triggers, the NCBA will pursue legislative or regulatory solutions as membership decides. In addition, the resolution called for a three-year review/sunset provision on any negotiated trade solutions implemented to yield a thorough cost benefit analysis.

Some other related resolutions were renewed or amended, calling for reauthorization of the Livestock Mandatory Reporting (LMR) program, 11 a.m. next day reporting of average carcass weights, and a USDA library of packer contracts.

It was not easy but it was friendly and effective. A democratic and representative structure can work.

About the author

Contributor

Steve Dittmer is the CEO of Agribusiness Freedom Foundation, a non-profit group promoting free market principles throughout the food chain. He can be reached at [email protected]

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