USDA: Meat packers must report online cattle purchases
Sept. 30, 2016
by Erica Shaffer
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The USDA's changes is expected to enhance transparency in pricing for fed cattle.
WASHINGTON – Starting Oct. 5, meat packers that purchase cattle on the Fed Cattle Exchange will be required to report those purchases for inclusion in the national and regional negotiated slaughter cattle reports issued by the Agricultural Marketing Service (AMS) of the US Dept. of Agriculture.
AMS made the decision to include Fed Cattle Exchange purchases in the agency’s reports based on requests from the cattle industry. “After review, it has been determined that livestock traded in this manner would meet the definition of a "negotiated purchase" as the Fed Cattle Exchange is merely a trading platform,” AMS said in a statement. “Negotiation does occur as buyers can bid on the livestock offered and sellers can accept or refuse the final bid. In addition, delivery must be scheduled within 14 days of the sale.”
The Fed Cattle Exchange is an online trading platform that allows cattle buyers to purchase market-ready fed cattle from commercial feedyards. Buyers can view the cattle offered for sale, and sellers can list their cattle for sale on the Exchange. Leading meatpackers Tyson Foods Inc., Cargill, JBS USA and National Beef Packing Co. all purchase cattle through the trading platform.
Cargill said the company is supportive of this effort. Caroline Ahn, a spokeswoman for Springdale, Arkansas-based Tyson Foods Inc., said the company is in favor of including transactions from the Fed Cattle Exchange into the Livestock Mandatory Reports.
“Price discovery is important to both the packing and feeding sectors, and we believe this move will improve it,” she said.
AMS noted that participation in the cash slaughter cattle market declined significantly to 25 percent today from 37 percent in 2010. The agency attributed the decline to the increasing use of formulas and forward contracts to market cattle. The result of this shift has been “reduced opportunities for price discovery in the negotiated market.”
The Fed Cattle Exchange was created to slow declining participation in the cash slaughter cattle market. AMS said that approximately 1,800 head of cattle per week have been offered through the Fed Cattle Exchange at price levels in line with current weekly reported markets. The agency estimates that the addition of the exchange transactions in the Livestock Mandatory Reports will increase reported weekly volume of negotiated purchases of cattle to 2 percent from 1.5 percent.