Beef Buzz News
Don Close Worries About Mandated Cash Cattle Trade
Tue, 02 Nov 2021 10:56:16 CDT
While the cattle industry looks to increase robust price discovery through cash trade, many producers and industry experts warn of the dangers of mandating cash trade. Many folks agree that mandated cash trade directly threatens alternative marketing agreements and grid-pricing of cattle.
Don Close, senior vice president for food and ag research, animal protein at Rabo AgriFinance told Radio Oklahoma Ag Network director Ron Hays, that there is no doubt that the cattle industry could use more cash trade but be careful not to disincentivize the producers working within AMAs.
"I think it would be incredibly detrimental," Close said. "If you look at the percentage increase in choice and prime carcasses that we are seeing today - in that 80% level, that was 55% just 25 years ago. When we started selling cattle on individual carcass merit, that is where the incentive came to make those cattle better. If we go back to any kind of mandated percentage, it is going to force us back into selling cattle on the average. That absolutely disincentivizes that quality improvement and I think it would be a horrible mistake for the industry."
Right now, the federal government is working on solutions for the beef cattle industry, one of which would be to mandate a certain percentage of cash trade. At the same time, Close does support increased cash cattle trade.
"I think the increased volume of cattle with provide a greater level on confidence throughout the market," Close said. "I think we have real opportunity of pricing cattle off of cutout. I think that would advance the market and put us closer to responses in the market by consumers, it would resolve a lot of the friction between producers of transaction types, but I also know it is a big reach to make that leap to cutout."
According to Close, as leverage neutralizes or inverts, and the industry continues to push the envelope in how it markets cattle, that is when the issue will rectify itself over time.
"I truly have compassion for the frustration producers are going through," Close said.
He said he sees producers fed up with the norm not working and understands why they are looking for change. He warns that shooting from the hip to make changes just for changes sake, is dangerous.
Click on the LISTEN BAR below to hear more from Ron Hays and Don Close as they talk about the U.S. beef cattle industry.
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.
Listen to Ron's conversation with Don here.
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