World Herald of Omaha
Agriculture is Nebraska’s economic engine, and beef production accounts for the largest share of the state’s agricultural value. Nebraska is home to more than 20,000 ranching and feeding establishments, most of them family-owned. The health of many communities across the state depends to a large extent on the health of the cattle industry.
In recent times, this sector has experienced difficult times. Producers’ share of the retail beef dollar has declined significantly. The World-Herald report by Henry Cordes and Paul Hammel examined the details. In 2014, the average share of producers in the retail price of beef was 55%. Today that share has fallen to 37%. At the same time, the share of packers has fallen from less than 1% in 2014 to 22% today.
Yes, one of the enduring foundations of agriculture is its cyclical nature. It is also true that certain short-term events caused major disruptions: a fire in 2019 that shut down a major packaging plant in Kansas; Closures related to COVID in 2020; a ransomware attack this year against the JBS mega-packer.
But none of this takes away the fact that the cattle market is not functioning fairly, and that is the central problem to be solved. It is in the interest not only of the cattle producers but of the general public itself that the market functions in a fair, transparent and efficient manner. Otherwise, the market may be subject to distortions and possible manipulation, harming both producers and consumers.
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This problem is already visible when it comes to chicken processing: the Big Four slaughterhouses have paid hundreds of millions in fines and civil penalties after allegedly conspiring to fix prices in this sector. Such collusive behavior in wrapping beef has not been demonstrated at this point, although the Federal Department of Justice is investigating as part of a larger antitrust action by the Biden administration.
The main concern of cattle farmers is the lack of price transparency: slaughterhouses ensure the vast majority of their livestock purchases through private agreements whereby producers agree to deliver the livestock on a certain day at a predefined price. Such an arrangement has advantages: producers have the certainty of a sale at an agreed price, packers are better able to handle the large volume of beef they need, and the system provides a general incentive for a high level of beef. beef quality.
But relying on agreements has major drawbacks. Slaughterhouses have increased control over the supply of livestock. Some large feedlot operators receive preferential treatment. Most importantly, the system undermines competitive bidding, so producers are unable to determine what the fair price should be for their livestock. Meanwhile, grocery prices for the American consumer continue to climb.
In short, these conditions prevent the market from functioning properly and deserve corrective action. Midlands lawmakers have constructive proposals in the US Senate to move the market away from this inefficiency and lack of openness.
The legislation of Senator Chuck Grassley of Iowa, a farmer, would require that a minimum of 50% of a packer’s weekly livestock volume be purchased through spot market auctions. Senator Deb Fischer, whose family operates a beef farm in Sandhills, has put forward a proposal that the U.S. Department of Agriculture should set transparent bidding thresholds that would vary by region of the country.
Agriculture has always had its ups and downs, and it will surely remain so in the future. But the current failures in the functioning of the market are unnecessarily damaging the Nebraska cattle industry and deserve much more attention and action. Fair markets are in everyone’s interest.