Minimum Negotiated Purchase Sign-On Letter

In light of the upcoming Livestock Mandatory Price Reporting reauthorization legislation, the USCA Marketing & Competition Committee proposes these changes to the program to increase transparency and true price discovery in the cattle marketplace. Please review the below sign-on letter and indicate your organization's or company's willingness to support this effort by completing the form below. We appreciate your consideration.


May XX, 2020


Chairman Pat Roberts Chairman Collin Peterson
Committee on Agriculture, Nutrition & Forestry Committee on Agriculture
U.S. Senate U.S. House of Representatives

Ranking Member Debbie Stabenow Ranking Member Mike Conaway
Committee on Agriculture, Nutrition & Forestry Committee on Agriculture
U.S. Senate U.S. House of Representatives


Dear Chairmen Roberts and Peterson and Ranking Members Stabenow and Conaway;

Over 80 percent of cattle in feedlots in the U.S. are slaughtered by four large meatpacking companies: Tyson Foods, JBS, Cargill and National Beef. Because these companies control a large percent of slaughter and processing capacity in the U.S., they have the unique ability to unduly influence the price of live cattle through the employment of tactics like bottlenecking processing speeds, importing chilled foreign meat to decrease demand for domestic supply, collaborating on pricing mechanisms, utilizing private forward-formula contracts, and piling up meat in cold storage to delay the need to purchase live cattle.

Fewer and fewer cattle are sold on a negotiated cash basis, which reduces the ability for true price discovery in the cattle marketplace. Negotiated cash cattle make up less than 20 percent of the market yet set the price for the other 80 percent of cattle sold through formula contracts and or cattle futures market.

With the reauthorization of the Livestock Mandatory Reporting Program (LMR) on the horizon, the below signatories present the following changes to be made to the current economic activities within the beef industry:

- Require minimum 30 percent of each packer processing plant’s weekly volume of beef slaughter to come as a result of purchases made on the open market or spot market, defined as those purchases which fall under Negotiated Purchase (Forward Contracts and Formula Marketing Agreement are not considered Negotiated Sales).

- The minimum would be mandated for all beef packing plants meeting the definition of a “packer" in the LMR Act, i.e. slaughter 125,000 head or more per year.

- Beef cattle purchased on the open or spot market, under the required minimum, are to be delivered to the packer not more than 14 days after the date on which the livestock are sold to the packer.

- Furthermore, no packer can discriminate against a seller for choosing to sell his cattle to negotiated cash sale purchases from that of other sales transactions.

With these changes in place, the Mandatory Livestock Reporting system could then be used to provide accurate and transparent reports of daily prices and number of cattle purchased via cash market, providing greater market opportunity and price discovery for independent cattle producers.

The undersigned organizations look forward to continued dialogue on this issue as we approach the program’s September 30, 2020 expiration date.

Sincerely,
XXX
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