January 28, 2021

Preparing for volatility: State Farm Bureaus renew interest in AFBF livestock group’s findings

WASHINGTON — A report examining the causes and consequences of livestock market volatility in 2020, specifically in the cattle market, is getting a second look from state Farm Bureau boards and members.

“It’s very easy to read, it’s for lay people to understand what happened and why it happened. All of the facts are there,” said Scott Bennett.

Bennett is a cattle producer and fourth-generation farmer from Virginia. He is the director of congressional relations for the American Farm Bureau Federation.

In April, Bennett and Michael Nepveux, American Farm Bureau economist, were part of a working group that examined volatility in U.S. livestock markets, focusing on cattle markets, to determine the causes of it and come up with some possible solutions.

Two separate events and the resulting havoc each wreaked with regard to meat supply and prices being paid for livestock prompted the formation of the group.

Those events — a fire at Tyson Foods’ Holcomb, Kansas, beef processing facility, and the onset of the COVID-19 pandemic in the spring of 2020 that saw massive shutdowns in the U.S. foodservice sector, including restaurants, hotels and conference venues, but also saw panic buying of food, including meat and dairy, in grocery stores across the United States — prompted questions and concerns about pricing and transparency in livestock markets, especially on the beef side.

“In April, the fire alarms were being pulled by everyone. We saw Holcomb and that was bad enough, but then in April we saw COVID and it made Holcomb look like batting practice. We said, whoa, we have to get our head around this. That was when President Duvall tasked the working group to relentlessly take a deep dive into things and that’s exactly what they did,” Bennett said, citing AFBF President Zippy Duvall.

The group was formed in response to concerns from the cattle sector.

“It was very tense at the time with concerns from the countryside about what was happening and the packers. There was no meat on the shelves, but prices weren’t going up. The whole system seemed to not be working for them,” Bennett said.

The working group started meeting in the late spring and met weekly for nine weeks. In addition to Bennett and Nepveux, the group included 10 state Farm Bureau presidents.

Scott VanderWal of South Dakota chaired the group. Other Farm Bureau presidents included Stefanie Smallhouse of Arizona, Craig Hill of Iowa, Richard Felts of Kansas, Mark Haney of Kentucky, Mike McCormick of Mississippi, Hans McPherson of Montana, Steve Nelson of Nebraska, David Fisher of New York and Russell Boening of Texas.

The group heard from stakeholders in the cattle industry, ranging from university economists to representatives from stockyards and meatpackers to industry member organizations.

“We had every viewpoint and perspective to present to the working group. We decided there wasn’t going to be a stone left unturned as far as trying to get to the bottom of what was going on,” Bennett said.

What resulted was a 14-page report.

“These state presidents said we need to take back to our Farm Bureau membership a document that they can use for Farm Bureau policy development that will allow for American Farm Bureau to be at the table. They created that document. Most of it is an economic analysis of what happened,” Bennett said.

Bennett added that AFBF could see some parts of the report being echoed back at the 2021 American Farm Bureau Virtual Convention, scheduled Jan. 10-13.

“My hope is that our state Farm Bureaus listened and read that document and will come to our resolutions process with policies that reflect what the working group found,” Bennett said.

The resolutions meeting precedes the annual meeting of the AFBF.

“We address all the policies that came from the states, and ultimately, once we get through that process, they will be voted on by our delegate membership at our annual meeting,” Bennett said.

The group arrived at four consensus points.

“These state presidents said Farm Bureau needs to address these four things more moving forward. Every state out there is going to have a unique way in addressing them but they need to be addressed,” Bennett said.

Mandatory minimum negotiated trade, which the AFBF opposes, was the top point of discussion. The report does give a nod to a regional version of that.

“A ‘triggered-style’ mandatory minimum was discussed, that is set on a region-by-region basis, at various and fluctuating levels to be determined regionally including input from state Farm Bureau members,” the report concluded.

Risk management and education on risk management was the second priority topic.

“The working group said there needs to be some risk management tools available for folks to protect themselves, so that in case this volatility does happen, they are not caught astray and they need to be educated on what’s available,” Bennett said.

Some ideas for livestock market risk management that the group discussed include internet-based platforms for auctions as a way to provide transparent market information, as well as risk management opportunities that could be provided by a boxed beef contract on the Chicago Mercantile Exchange and changing risk management options on the CME and through private providers to make those more accessible to smaller livestock producers.

In addition, the group said that adjustments to existing risk management tools, like the Livestock Risk Protection crop insurance product, could make those more affordable and accessible for smaller producers.

The third consensus point was small meatpacking plants and the role they can play in sustaining the nation’s meat supply and as a way for producers to get animals to market.

“The working group said these smaller packing plants need to play a more significant role in our supply chain than they currently are. They could provide value in times of distress like this, when you have these massive plant shutdowns. Those smaller plants can help keep meat on peoples’ tables,” Bennett said.

The group supported three pieces of legislation in the 116th Congress pertaining to small meatpackers: the RAMP UP Act, the DIRECT Act and the Small Packer Overtime and Holiday Fee Relief for COVID-19 Act. None of those bills reached a vote.

The fourth consensus point was to reaffirm support of the Grain Inspection, Packers and Stockyards Administration.

“That reinstates that American Farm Bureau Federation supports a strong GIPSA so that the marketplace remains fair and that the producer is heard and not being bullied by the packers,” Bennett said.

The AFBF Cattle Market Working Group Final Report is available at: www.fb.org/files/AFBF_Cattle_Market_Working_Group_Final_Report.pdf.

Jeannine Otto

Field Editor