Economic Tidbits

Changes Needed to Livestock Price Reporting?

Ways Fed Cattle are Purchased Priced 02.10.20

The Livestock Mandatory Reporting Act (LMR) requires large beef packers to report purchase prices for slaughter cattle to the Agricultural Marketing Service (AMS).

Purchase prices are reported for negotiated or cash purchases for two delivery windows (0-14 days and 15-30 days), formula contracts, negotiated grid purchases, and forward contracts. Data is aggregated within 5-area market reporting regions with Nebraska being a region unto itself. Confidentiality rules protect the privacy of the data reported and transactions.

The AMS is growing concerned the confidentiality rules are limiting the reporting of negotiated purchases for the 15-30 day delivery window in certain market regions. A study funded by the AMS and conducted by researchers at Kansas State and Iowa State Universities examined this concern and the feasibility of reporting cash purchases in the two delivery windows through a realignment of the market reporting regions. For the study, the researchers analyzed all negotiated transactions reported to the AMS between 2014 and 2018.

Figure 1. Ways Fed Cattle are Purchased & Priced, 2005-August 2019

Ways Fed Cattle are Purchased Priced 02.10.20

Source: Schroeder, Ted C., Schulz, Lee L, and Tonsor, Glynn T, Feasibility Assessment of Reporting Negotiated Slaughter Cattle—Purchases in Separate Delivery Window Categories, Research Report Prepared for the USDA Agricultural Marketing Service, Nov. 4, 2019.

The researchers found that since 2008 negotiated trade has declined from around 55 percent of total cattle purchased to 25 percent. On the other hand, formula purchases have increased from 35 percent to 60 percent (Figure 1). Nebraska dominated the nationwide negotiated purchases, representing 37 percent of the total U.S. negotiated transactions with nearly 58,000 transactions. These transactions comprised more than 9 million head of cattle. Iowa followed with 47,000 transactions, or 21 percent of the total. Kansas had 17 percent (Figure 2). The report also notes that nearly two-thirds of the negotiated transactions in the 15-30 day delivery window occur in the Nebraska and Iowa/Minnesota regions.

The study makes recommendations on how the reporting regions might be realigned to allow for continued reporting of cash transactions with a 15-30 day delivery window and protect the confidentiality of the transactions. The AMS is seeking comment on the recommendations. For more information on the study or recommendations go to: https://www.ams.usda.gov/rules-regulations/mmr/lmr/2019stakeholdermeeting.

Figure 2. Shares of 0-30 Day Negotiated Cattle Purchases, 2014-2018

Shares of 0 30 Day Negotiated Cattle Purchases 2014 2018 02.10.20

Source: Schroeder, Ted C., Schulz, Lee L, and Tonsor, Glynn T, Feasibility Assessment of Reporting Negotiated Slaughter Cattle—Purchases in Separate Delivery Window Categories, Research Report Prepared for the USDA Agricultural Marketing Service, Nov. 4, 2019.

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