A meat trade group has warned the federal government against meddling in the meat industry. They argue that government action by means of laws and mandates will cost meat producers millions of dollars. The trade group's warning comes amid plans by lawmakers to draft new legislation supposedly benefiting cattle producers in the United States.
North American Meat Institute (NAMI) President and CEO Julia Anna Potts expressed her opposition to government interference in an Oct. 5 statement. She cites a report done by Texas A&M University's Agricultural and Food Policy Center, the U.S. Department of Agriculture (USDA) and economic experts titled "The U.S. Beef Supply Chain: Issues and Challenges."
The almost 200-page report argues that proposals seeking to increase government intervention and mandates will cost livestock producers billions of dollars. "Supply and demand have the most influence on the price of cattle and goods for consumers," Potts writes.
She continues that the report has also looked at current legislative proposals and found that the consequences of these plans "will harm those they are meant to protect," referring to cattle producers.
The NAMI president's statement comes amid a proposal from Sen. Jon Tester (D-MT) and Sen. Charles Grassley (R-IA). The bipartisan proposal mandates U.S. meat processing facilities slaughtering more than 125,000 head of cattle yearly to purchase either 50 percent or 30 percent of their weekly volume of beef for butchering on the open or "spot" market, alongside a 14-day delivery period.
Tester defends the plan as a way to "improve to accuracy of formula pricing … and increase transparency for producers and feeders."
"This bill will force meat packers to engage in more spot transactions, bringing up formula prices and making them more accurate while giving Montana producers and feeders more flexibility when they bring their livestock to market," the Democratic senator says.
At least two other meat industry groups have expressed support for the bipartisan bill. The U.S. Cattlemen's Association has welcomed the planned legislation and expects the bill to "play a larger role" in conversations about the Livestock Mandatory Reporting program.
Meanwhile, the Iowa Cattlemen's Association has issued a statement reiterating its support for the bill. The Iowa group adds that it has worked to inform Grassley and Sen. Joni Ernst (R-IA) – a co-sponsor of the bill – of the challenges it faces.
Still, Potts defends the findings of the Texas A&M and USDA report, adding that it "should be a required reading for members of Congress who want to help livestock producers and consumers."
What are NAMI's gripes with the bipartisan bill?
The report notes that "the bottom-line impact of any intervention into the cattle market is the fact that there are modest benefits and considerable costs due to lost efficiency and product quality from mandates." It mentions a number of mandates that will have a significant negative impact on the industry in case they become law. (Related: Total WAR on FOOD targeting ranchers to outlaw all forms of meat, including cattle and backyard chickens.)
The report's fifth chapter centers on laws requiring minimum negotiated cash market purchases, often called 50/14 or 30/14 proposals. Dr. Stephen Koontz of Colorado State University (CSU) writes: "The short-term impact for a policy most like that being considered is a $2.5 billion negative impact in the first year, and a cumulative negative impact of $16 billion over 10 years, inflated to 2021 dollars."
He adds that farms and ranches would bear much of this impact.
Furthermore, Koontz clarifies that the $2.5 billion initial loss and an accumulated $16 billion loss comes with the 50/14 proposal. The 30/14 proposal would have similar impacts, but the losses would only be half of the 50/14 counterpart.
"The experts consulted have repeatedly stressed the cyclical nature of the cattle business. While cattle supplies have outpaced available [meatpacking] capacity, that will not always be the case. As a result, anyone who decides to build additional capacity must understand those market dynamics and be aware that packer margins can plummet with that cycle," Koontz notes. (Related: Lots of people are about to inadvertently go vegetarian due to widespread shutdowns of meat packing plants across the USA.)
The CSU professor concludes: "Mandates create winners and losers, but also will leave a marketing system worse off. There are substantially less expensive methods for improving the quality of price discovery in fed cattle markets than by legislating mandates."
Potts also cited in her Oct. 5 statement a warning printed in the book: "In the meantime, we would urge extreme caution in making changes to a system that has grown organically over time to reward high-quality beef production in a way that acknowledges regional differences throughout the country."
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Sources include:
AFPC.TAMU.edu [PDF]
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