The Iowa Cattlemen’s Association Board of Directors recently reaffirmed its desire for 50% negotiated cash trade in all major cattle feeding regions as a way to increase price discovery and bring more leverage to independent producers in the fed cattle markets nationwide.
Iowa’s cattle producers participate in the cash market with higher frequency than other regions of the United States, setting the base price for formula transactions that are much more commonplace in large feedyards in southern states like Texas. In most weeks, more than 50% of Iowa’s fed cattle are traded through cash negotiation, compared to about 5% in Texas.
In June of 2016, the ICA board put in place a policy encouraging 50% cash trade. Since that time, however, there have not been significant increases in cash trade in other parts of the United States. The new policy passed by the board supports a regulatory approach to ensure increased negotiated trade and price discovery by mandating packers to purchase at least 50% of their cattle through negotiated cash trade at the plant level. ICA also supports a 14 day delivery period. It also aligns closely with the Nebraska Cattlemen’s Association’s policy.
“Traditionally, the cattle industry does not support increased regulation,” says Matt Deppe, CEO of the Iowa Cattlemen’s Association. “But at this point, we have exhausted all other options, and we cannot allow Iowa’s cattle producers to continue carrying the burden of price discovery for the entire industry.”
In addition to the lack of price discovery caused by this disparity, Iowa’s cattle producers have recently had to bear the brunt of the challenges caused by decreased packing capacity due to COVID-19. Formula cattle have filled nearly all available slaughter space, leaving Iowa’s market-ready cattle in the feedyards.
