Fed cattle producers increasing negotiated trade

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More producers are taking part in negotiated cash trades, according to the National Cattlemen’s Beef Association.

Robust price discovery in fed cattle markets is top of mind in the cattle industry. While there are legislative proposals afloat regarding requiring negotiated cash trade by large meatpackers, the NCBA is trying to accomplish the goal voluntarily.

NCBA is encouraging meatpackers and cattle producers to increase the number of negotiated trades and is monitoring quarterly transactions to determine if they meet regional thresholds for robust price discovery based on industry analysis.

Results for the second quarter of 2021 show improvement on the seller side. Packer participation has not yet been finalized and was not evaluated.

NCBA has now finalized agreements with the four major packers to analyze their participation in the negotiated market from the third quarter onward, Jerry Bohn, NCBA president, said in a letter to NCBA members.

“Resolving this critical piece of our voluntary effort will help ensure that both buyers and sellers of live cattle bear mutual responsibility of achieving robust price discovery,” he said.

Only the negotiated trade volume, and not packer participation, was evaluated in the second quarter. As a result, a major trigger — used by NCBA to determine when it’s time to seek a legislative or regulatory solution — was not tripped in the second quarter.

“In the second quarter, we continued to see a striking level of buy-in to our voluntary framework from cattle producers. They have worked overtime to offer more cattle on a negotiated basis,” Bohn said.

Due largely to the hard work of cattle feeders, particularly in the Southern Plains, there was more participation in the second quarter of 2021 than in the first quarter, he said.

“The same accolades cannot be given to some of the major packers,” he said.

“Some packers have shown a desire to work alongside us to increase their procurements of negotiated cattle, and we appreciate that they have recognized the importance of price discovery to the entire industry,” he said.

“That said, NCBA has been frustrated by the apparent lack of urgency demonstrated by some of the largest purchasers of fed cattle,” he said.

NCBA evaluates two silos — negotiated trade and packer participation — with four regional obligations for each.

The plan is to achieve no less than 75% of robust trade levels and packer participation in each region no less that 75% of the price reporting weeks in a quarter or 10 weeks out of the 13 in a given quarter.

Failure to meet those levels constitutes a minor trigger, and three minor triggers constitute a major trigger. NCBA would seek a legislative or regulatory solution if there are two major triggers in a set of four rolling quarters.

A detailed breakdown of second-quarter results won’t be available until early August.

Analysis of trade in the first quarter of the year showed negotiated trade fell short of the program’s goals in some regions. But it also showed substantial improvement in some regions compared with the first quarter of 2020.