Livestock economists say regional cash cattle report improves transparency

An improved regional cash cattle report could help ranchers who have faced fewer reported cattle sales in recent years, according to three livestock economists.

The U.S. Department of Agriculture introduced a regional cash cattle report Oct. 26 that combines information from Colorado, Kansas, New Mexico, Oklahoma, and Texas. The agency said the report is intended to improve pricing transparency for cattle producers.

Glynn Tonsor, a professor of agricultural economics at Kansas State University, said the new report may help reduce transaction costs for some producers who previously were using a stand-alone report specific to a subset of the newly defined, wider geographic region.

The report itself does not change the volume of negotiated trade, but rather how USDA provides market information under Livestock Mandatory Reporting, he said.

Shrinking share

The Agricultural Marketing Service’s change comes as negotiated cash transactions account for a shrinking share of cattle sales. USDA noted those transactions declined from more than 50% of sales in 2005 to less than 18% last year.

Most of the adjustment in fed cattle marketings occurred several years ago and is not a recent development, Tonsor said. The shift from negotiated to formula transactions is multifaceted, reflecting better alignment of consumer demand signals with live animal production as well as reduced costs for fed cattle transactions, he added.

“As a simple point, I do not think the industry would experience current cattle prices absent strong beef demand, which itself I do not believe would be a reality absent industry adjustments over multiple decades—this includes changes in fed cattle marketing,” Tonsor said.

The increasing use of formula-based purchasing arrangements has made it more difficult to maintain accurate regional price reports while protecting confidential business information, USDA said in a news release.

David Anderson, a professor and Extension specialist for livestock and food product marketing at Texas A&M University, said he does not think the report will increase bids, but it will improve price transparency.

“I think that this is a real positive in the market,” he said. “If we are concerned about how well the market is functioning then this new report is a positive step.”

Alternative markets

So much of the change in fed cattle pricing is the move to more alternative marketing arrangements and formulas, Anderson said. Alternative marketing arrangements provide economic benefits to buyers and sellers.

“It also, I think, is related to more and more value-based marketing,” he said. “We have more ‘niche’ and more branded products and more market differentiation. I think that leads to less negotiated cash as we think of it today.”

Derrell Peel, who holds the Charles Breedlove Professorship of Agribusiness in the Department of Agricultural Economics at Oklahoma State University, said Colorado had not reported for a long time, although the state is considered one of the five market regions. Colorado generally was not included in reports because of confidentiality rules, he said.

“They just don’t have enough trade there to report and what happened then in July was we started seeing Kansas not being reportable and Texas and Oklahoma not being reportable,” Peel said. “We’ve gone basically all summer without any of those regional prices being reported by USDA and the only thing we’ve really had was the five market average, which includes all those regions plus Nebraska, Iowa and Minnesota.”

The broader market report will also be retained, he said, adding information from the new report has been lacking in recent months.

“That’s probably a good thing because the market has been operating without any information in those regions for about three months,” Peel said.

U.S. Secretary of Agriculture Brooke Rollins said reliable, transparent pricing information is essential to a competitive cattle market.

The report is available at https://www.ams.usda.gov/market-news/regional-direct-slaughter-cattle.

Dave Bergmeier can be reached at 620-227-1822 or [email protected].