Oklahoma Farm Report - Dr. Bart Fischer Says Robust Price Discovery May Not Lead to Higher Cattle Prices

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Dr. Bart Fischer Says Robust Price Discovery May Not Lead to Higher Cattle Prices

Tue, 12 Oct 2021 10:48:19 CDT

Dr. Bart Fischer Says Robust Price Discovery May Not Lead to Higher Cattle Prices While beef prices soar to all-time highs, cattle producers continue to cry foul. For the most part, the issue is now common knowledge, attracting industry professionals, politicians and innovators from all corners of the country to dissect what is causing the gap between live cattle prices and beef prices.

Today, Radio Oklahoma Ag Network Director Ron Hays features comments from Dr. Bart Fischer, co-director of the Agricultural & Food Policy Center at Texas A&M University. Fischer, along with other agriculture economists, has released a book on the matter: "The U.S. Beef Supply Chain: Issues and Challenges." Sharing the comments from Fischer is farm broadcast colleague Carey Martin.

The book examines the disparity of the symbiotic industries starting with the Holcomb, Kansas beef packing plant fire on Aug. 9, 2019. The plant was the second-largest beef packing plant in the nation. The fire kept the plant offline for the remainder of the year, which led to a temporary spike in boxed beef and decreased demand for fed cattle, according to the book.

"(The book) covers a lot of ground," Fischer said. "We have 10 different chapters, covering a lot of different topics. Most of them boil down to issues related to fed cattle pricing."

Fischer said AFPC was the coordinator of the project, with Fischer as editor, along with Dr. Joe Outlaw and Dr. David Anderson as editors also. Industry professionals around the country contributed research to the project this summer, he added.

"We took all of that (research) back and wrote it up in the book," Fischer said.

Perhaps the number one finding of the book is a reminder of where alternative marketing agreements, which have been valuable to producers, packers and consumers, originated from, according to Fischer.

"One of the primary findings is that innovation on formula-based pricing was really derived from the ground up," Fischer said. "It originated with the feeders who were looking at trying to capture the value associated with improved quality."

The book comes at a time when talks of mandating cash trade from the federal government threaten natural incentivization of the industry.

"On one hand you have a lot of folks, including policymakers, who are saying, 'we should mandate that - a certain percent (of trade) must be based on a cash or negotiated transactions," Fischer said. "We found - that instead of helping prices at the cow-calf level, imposing a certain amount of cash actually leads to less efficiency in the system."

According to Fischer, each transaction an animal goes through from its journey from farm to table means more costs that ultimately gets pushed down to the producer. Right now, a particular proposal is on the policy table that could cost cow-calf producers up to $16 billion dollars in the next 10 years, he added.

The most interesting finding to Fischer is that robust price discovery may not lead to higher cattle prices.

Click on the LISTEN BAR below to hear more from Ron Hays and Dr. Bart Fischer as they wrap up their conversation, talking about how robust price discovery could end up hurting producers and packing capacity.

The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.