Cattle prices have been of significant concern and focus in recent years, and especially so during the ongoing COVID pandemic. Federal and state policymakers have responded in various ways, including providing funding to support establishment and expansion of state meat inspection facilities and pursuing federal legislative proposals to require minimum levels of cash transactions between beef packers and producers. The most recent legislative proposal, and the focus of this brief article, is the Cattle Price Discovery and Transparency Act of 2021 (S.B. 3229).
3229 currently has bipartisan support, with seven Republican sponsors and six Democratic sponsors. The proposal is likely to be modified as it moves forward, though the full nature and extent of those changes are difficult to predict. Currently, S. 3229 has two major features — the establishment of a publicly available online cattle contract library and the creation of “regional mandatory minimums”.
The cattle contract library would be “a library or catalog of each type of contract offered by packers to producers for the purchase of . . . fed cattle, including any schedules or premiums or discounts associated with the contract.” Packers would be required to provide, among other important items of information, information about the type of contract (i.e., formula marketing agreement, forward contract, or negotiated grid purchase contract), the duration of contract, a summary of the terms of the contract, and “provisions in the contract that may affect price”. A failure to comply with the cattle contract library requirements could result in, among other consequences, civil penalties assessed against the packer and/or a cease and desist order issued by the USDA Secretary.
3229 defines “regional mandatory minimum” to mean “for each reporting region (as designated by the Agricultural Marketing Service), of the quantity of cattle purchased for slaughter by a packer . . . in that region each current slaughter week, the minimum percentage of such cattle that are required to be purchased through negotiated purchases or negotiated grid purchases from producers.” As currently drafted, S. 3229 does not specify how many reporting regions USDA will create nor how many or what states will be in each of the reporting regions.
3229 requires that a regional mandatory minimum established for each reporting region cannot last for more than two years. Additionally, S. 3229 requires USDA to review the regional mandatory minimums at least once every two years to determine whether the minimum should be continued or modified. Both the initial regional mandatory minimum and any subsequent modifications must be established through notice-and-comment rulemaking. Finally, S. 3229 provides that no initial regional mandatory minimum for any reporting region “shall exceed 300 percent of the lowest initial regional mandatory minimum.” S. 3229 requires the USDA Secretary to regularly monitor packers’ compliance with the regional mandatory minimums and to enforce suspected violations pursuant to the Packers and Stockyards Act of 1921. Finally, USDA would be required to conduct a “quantifiable, data-driven cost-benefit analysis regarding the operation and effect of those regional mandatory minimums.”