Ranch state senators are pushing to prop up cattle prices in response to an expected crash in the beef economy.
A bill emerging Friday morning sets minimum pricing for cattle sold in 2020. The response comes as restaurants around the country close under local and state government orders in an attempt to prevent the spread of the coronavirus pandemic.
It’s the restaurant industry that buys the majority of U.S. beef graded “prime” by the U.S. Department of Agriculture. When those top-end sales don’t occur, the value of cattle drop considerably.
“These are challenging and unprecedented times, and it is critical that we get relief to Montana ranchers and ag more broadly who are struggling due to this virus,” said U.S. Sen. Steve Daines, R-Montana. “This bill would help provide critical relief quickly, and I will continue working to ensure our ranchers get the help they need.”
Both Sens. Daines and Montana Democrat Jon Tester are signers of the bill.
“Because of this crisis, beef prices are floundering and our family-operated ranches are struggling to meet their bottom lines,” Tester said. “If we don’t act quickly to stabilize cattle markets we’re going to see more and more corporate consolidation in agriculture as independent producers are no longer able to compete. This bill will give Montana ranchers the security they need to get through the year-and this pandemic-with the tools to stay in business.”
For feeder cattle — weaned calves sold into feedlots — the minimum price would be a national average of $150 per hundredweight. In any month of 2020 in which the price was below that national average, the U.S. government would make up the difference.
For live cattle, that is cattle that have been fattened up to 800-plus pounds and are being sold to meatpackers, the minimum national average price per hundredweight would be $121.
There would be a 10,000-head limit on how many animals a rancher could be compensated for. Producers would also be required to own the animals for at least a month, a timeline that recognizes the short-term cattle are owned by feedlots.
Montana sells a million head of cattle every year, according to USDA data, and those sales averaged $1.58 billion a year for five years ending in 2018. At the start of the last recession, those prices fell below $1 billion, before sales to foreign countries buoyed the price. By 2012 foreign beef sales accounted for 14% of the U.S. beef economy. That rebound didn’t take place in midst of a global pandemic shutdown.
At the end of 2019, cattle prices, which have been on a months-long decline, were starting to rebound, said Fred Wacker, Miles City rancher and president of the Montana Stockgrowers Association. Back in December, cattle futures were at about $1.25 a pound. Then the new coronavirus started sending ripples through the market. Now futures prices are in the mid-90s, Wacker said. Fat cattle that should be selling for $1.30 are selling for $1.10 a pound, which might not seem like much until you realize that the animal being sold weighs a thousand pounds. A producer with a thousand animals at the weight stands to lose $200,000 in a year, assuming the market doesn’t get worse.
“It’s all due to the coronavirus and the drawing back,” Wacker said. “Restaurants are closing, not wanting to buy forward. We’ve not been able to do a lot of exporting as of yet. So, we’ve got some problems. I feel like any other business, we have a serious issue with revenue falling off at no fault of the rancher.”
The economic challenges of the pandemic comes as ranchers call on Congress to do something about suspected price manipulation by the nation’s four monopoly meatpackers. The allegation is that since August meatpackers have experienced favorable profits selling wholesale boxed beef to supermarkets, while prices paid to ranchers have declined. Thursday, Daines and senators from three other cattle states asked U.S. Attorney William Barr to launch an investigation into the meatpacking industry. Similarly, Tester asked Agriculture Secretary Sonny Perdue to complete an investigation into price manipulation that started last fall, but hasn’t concluded.