Jan 31, 2023
USDA Launches Cattle-Sales Database to Check Meat Giants’ Power
(Bloomberg) -- The Biden administration introduced a public database on payment terms for private cattle sales, designed to give producers more leverage in negotiating with the four meatpacking giants that dominate US beef processing.
The Cattle Contracts Library will go live as a pilot project at noon on Tuesday and will disclose terms for all cattle-purchase contracts made by large meat packers, but not the identities of buyers or sellers, US Agriculture Department officials said. That will include how the base price in each contract is calculated and premiums paid for special traits such as prime-grade beef, Angus cattle or hormone-free animals, as well as penalties deducted for less-desirable livestock such as older cattle.
President Joe Biden has targeted industry concentration in the food sector as soaring grocery prices help drive up inflation. Complaints from ranchers and feedlot operators about meatpackers’ market power also surged following the pandemic, when the spread widened between the price producers receive for cattle and the cost consumers pay for hamburgers and steaks in the grocery store.
“USDA is committed to creating a more level playing field for cattle producers,” Agriculture Secretary Tom Vilsack said in a statment. “The Cattle Contracts Library pilot program supports this commitment by providing producers with the market information they need.”
Smaller and mid-sized producers argue they have become more disadvantaged against large corporate feedlots as the share of cattle sold through open cash markets has declined in favor of purchases through private contracts. The share of fed cattle purchased through such markets has fallen from 52% in 2005 to 20% in 2021, according to USDA data. In one region, the portion dropped below 8% in 2021.
A 2022 USDA report found that the thin public cash market heightens the risk of market manipulation and other problematic conduct.
The database won’t initially include the number of cattle purchased through each agreement but USDA plans to add that data in about a month, the officials said.
Disclosure of the contract terms “could potentially be very beneficial to the cattle industry,” said Justin Tupper, president of the US Cattlemen’s Association, who owns a ranch and livestock auction in St. Onge, South Dakota.
“I know the big corporate feeders are getting a better deal than me, but I don’t know what it is,” Tupper said. “If we know they’re getting $6 more than us, then we should be able to hold out for a better price.”
Congress directed the USDA to set up the pilot project in a provision added to the spending package funding the federal government in 2022. The pilot will end on September 30, after which Congress will have to decide whether to continue the contract database.
The move comes as the US herd has been declining due in part to drought in the Plains that shriveled pastures. Fewer cattle are giving ranchers more bargaining power while meatpackers that made record profits on beef during the Covid-19 outbreak have signaled the boom has come to an end. A cattle-inventory report due later Tuesday is expected to show the US herd is the smallest since 2014, according to a Bloomberg survey.
Packers that handled at least 5% of the total number of fed cattle slaughtered nationally are required to submit information for the database.
©2023 Bloomberg L.P.