Study Confirms Market-Driven System is Vital for Cattle Producers
WASHINGTON - In reviewing the "Livestock and Meat Marketing Study," just released by USDA's Grain Inspection, Packers and Stockyards Administration (GIPSA), the National Cattlemen’s Beef Association (NCBA) says the report provides quantitative support for what NCBA members have known all along.
“In short, the report reveals that a market-driven system works,” says NCBA President and North Carolina cattle producer John Queen. “NCBA remains committed to protecting cattle producers’ rights to market cattle the way they see fit, and will fight government attempts to restrict or direct producers’ choices.”
The study was based on transactions representing more than 58 million cattle sold between October 2002 and March 2005. While the majority of cattle are marketed through traditional cash market means, the new study shows alternative marketing arrangements (AMAs) such as forward contracts, production contracts, packer ownership or custom feeding have provided benefits to some producers without harming the competitiveness of the marketplace.
“This study found that producers can market their livestock in different ways and see additional economic benefits––all while maintaining a strong a viable cash market,” explains NCBA Chief Economist Gregg Doud. “Proposals to ban packer ownership and limit cattle marketing options can sound very appealing on the surface, because we’re all concerned about packer concentration and keeping the marketplace competitive. This study shows these restrictions can hurt the very people they are intended to protect.”
Sixty-two percent of the fed cattle traded in the study were essentially cash or spot market traded cattle, while 38 percent were marketed through various AMAs. According to the study, only 5 percent of the cattle were owned directly by packers, a number closely watched by the industry.
“In today's marketplace, producers need the freedom and flexibility to market their cattle in ways that provide the best return on their investment,” says Doud. “It’s about the producer’s bottom line.”
“During debate of the 2002 Farm Bill, concerns from producers about packer concentration led NCBA members to ask Congress to study the livestock and meat marketing complex,” explains Queen. “In 2003, Congress authorized $4.5 million to conduct an independent study of the livestock and meat marketing complex and provide a report that would be the definitive answer on this issue.”
The consensus of producers surveyed for this study was that using alternative marketing arrangements gave many the ability to buy and sell higher quality cattle, improve supply management, and obtain better prices.
“Alternative marketing arrangements allow producers to manage risk,” says Doud. “These marketing arrangements are just one way to market cattle - the report reinforces the fact that cash or spot market transactions are extremely important to our industry.”
The study concludes that reducing or eliminating the use of alternative marketing arrangements would result in economic losses for both cattle producers and beef consumers.
The interim and final reports, including peer reviewers' comments and additional information about the study, are available on GIPSA's website at www.gipsa.usda.gov.