Federal bill could change cattle pricing process, but Wyoming ranchers are skeptical
A federal bill is proposing to change how cattle are sold to meatpackers, and although some Wyoming ranchers say the system is currently broken, they are skeptical that the bill could change the process.
"The cattle market is incredibly complex," said Brett Crosby, a cattle rancher in the Bighorn Basin.
Crosby also owns a consulting firm that specializes in cattle market research and represents Wyoming in the U.S. Cattlemen's Association.
Crosby said a cow might change hands four times before it is at the supermarket, and that entire process can take up to two and a half years.
"Wyoming ranchers are a ways downstream in the cattle production cycle," he said.
Wyoming ranchers are often the folks at the start of the market. They raise the calves and sell them off to feedlots. The calves might go to a few different feedlots before being sold to the meat packers.
And, that last stage of the process is where some say pricing issues arise. Four meatpackers control 80 percent of the market - Tyson Foods, Cargill, JBS and National Beef Packing Company. Many in the industry call them the 'Big Four.'
The packers use a fixed price to buy cattle that is based on a formula determined by data from negotiated cattle prices. The formula price was initially put in place to save everyone time and to reward higher quality cattle. It is almost like a set menu, if your cattle are grass fed and raised in a certain region, you will get this set price.
But in recent years, Crosby said on average only 20 percent of cattle sales are negotiated between buyer and seller nationally. That means for 80 percent of cattle there is no negotiation, and sales are fixed and based on stale data.
"It's so small that it's not really a statistically significant price that gives you confidence in that price being really an accurate reflection of the market value," Crosby said.
And that is what the bill in Congress is trying to address. The Cattle Discovery and Transparency Act of 2022 would mandate that the meatpackers have to buy a higher percentage of cattle through negotiated prices than they are now.
"We want a competitive price," Crosby said. "And we want to make sure that since there's only four packers that all four packers are bidding on cattle so we can ensure that the price that we see is the result of market competition and free market forces at work."
Albert Sommers is a cattle rancher in Sublette county. And even though he does not deal directly with the meat packers, the prices they offer feedlots reflect what feedlots will offer him for his cattle.
Sommers said the federal bill could be helpful, but only if it addresses price fixing.
"That will trickle down - first it'll help the feedlot guy because then they're more likely to get an accurate reflection of the market and not what the prices are fixed at," Sommers said. "If they can stop the price fixing, it will be a good thing for the common rancher."
Chris Bullinger is a rancher in Basin. He runs a "backgrounding" operation, which is like an intermediate feedlot. He takes calves from ranchers and fattens them up for the final feedlots.
Bullinger said it is getting harder and harder to make a living in this industry. The prices for cattle are not keeping up with the economy.
"The cost of feeding has gone up quite a bit, and there's no margin left by the time we sell," he said. "We started in this 20 to 30 years ago, and you could make $50 to $100 profit per head. Now you're really lucky to break even."
Bullinger said he has reservations that this bill could change how cattle are priced. He said the Big Four control so much of the market that they always find loopholes.
Jim Magagna, executive vice president of the Wyoming Stock Growers Association, also has concerns.
Magagna said the formula pricing guarantees an extra payout for higher quality cattle, like those fed with minimal use of antibiotics and growth hormones. He said small details like that could get lost in translation during negotiation.
"If you went back 40 years in our industry, a steer was a steer was a steer, so to speak. And basically, you were selling a commodity item," he said. "Today, we've become far more sophisticated on the production side of the cattle industry."
The Cattle Price Discovery and Transparency Act of 2022 is being reviewed by the Senate Agriculture Committee. It's cosponsored by Wyoming Senator Cynthia Lummis.