Between record inflation, high energy costs, and regulatory uncertainty, independent Iowa cattle producers face major challenges to make a living and raise high-quality beef. Egregious WOTUS regulations threaten to saddle producers with costly red tape, sky-high feed prices drain cash reserves, and the cyclical nature of droughts and floods contribute to constant unpredictability. However, the greatest concern that we hear from Iowa cattlemen is the growing power and outsized influence of the Big Four meatpackers.
The Big Four meatpackers – Tyson Foods, JBS, Cargill, and Marfrig – control 85% of the cattle market, leaving independent producers and their families in the dust. These packers can use their clout to control beef prices by setting line speeds, regulating slaughter numbers, and writing unfair contracts. Instead of paying cattlemen a fair price for their product, the big packers have increasingly forced producers to sign alternative marketing agreements (AMAs), which establish beef prices well in advance and trap cattle producers in a raw deal. Ultimately, these anti-competitive tactics take advantage of independent producers who lack vital pricing information and other critical market data, essentially cheating producers out of a fair price. But Iowa cattlemen have product quality on their side.
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According to a report from the University of Nebraska, over 94 percent of cattle in the Iowa-Minnesota U.S. Department of Agriculture cattle region grade over 80 percent choice, compared to less than 13 percent of cattle from the Texas-Oklahoma-New Mexico region. This comes as no surprise to Iowa cattlemen. In Iowa, our cattle producers grow the corn that they feed to their cattle, which results in the highest quality beef at slaughter. However, the same cannot be said for other states where cattle are fed grass, hay, and other silage. Regrettably, current packing practices prioritize lower quality beef at the expense of Iowa’s high-quality product.
That’s why we recently reintroduced our Cattle Price Discovery and Transparency Act to bring much-needed fairness and transparency to the cattle marketplace. Our legislation is straightforward: Iowa cattle producers should have access to the same market information that the big packers use to manipulate beef prices and exploit independent producers. The bill enjoys wide, bipartisan support in both the U.S. House of Representatives and the U.S. Senate.
Among many important provisions, our bill sets mandatory minimum cash purchases by the Big Four packers and establishes approved pricing mechanisms for fed cattle purchases by covered packers –those controlling five percent or more of fed cattle slaughter. This includes negotiated cash or negotiated grid purchases and purchases at stockyards and through trading systems where multiple buyers and sellers can make and accept bids. These provisions will improve price discovery for independent cattle producers so they can make informed decisions in a more balanced marketplace. It also requires the USDA to create between five and seven cattle regions that reflect similar fed cattle purchases, which acknowledges that not every part of the country markets cattle in the same manner.
These reforms – while vehemently opposed by the Big Four meatpackers – will give independent cattle producers a strong voice in price negotiations and beef transactions. Competition, transparency, and access to information are all critical prerequisites to a fair economy and the purest form of capitalism. Surely, the big meatpackers can agree to these basic rules.
The status quo, where Iowa cattlemen are one “black swan” event away from losing everything that they built, cannot remain the norm. Iowa cattlemen deserve to sell their beef on a level playing field. With the right information and full transparency, independent cattle producers can receive a fair price and the big meatpackers will finally be held accountable for their anti-competitive schemes. Born and raised in rural Iowa, this issue is personal to us, and we will continue to do everything in our power to protect Iowa cattle producers and ensure that this legislation becomes law.
U.S. Senator Chuck Grassley is the senior senator from Iowa.
U.S. Rep. Randy Feenstra represents Iowa’s 4th Congressional District in the U.S. House of Representatives.