Cash Market for Domestic Beef
Resources > Purveyors > Cash Market for Domestic Beef

Are you a Smart Kitchen™ Chef?

Try it FREE or take a TOUR to explore Smart Kitchen!
+ -

 

The competitive cash market for cattle has been gradually shrinking since the 1990s, but the pace of decline has quickened in the last few years. In 1999, the cash market accounted for nearly 70% of cattle sales to the top meatpackers. By 2007, it had fallen to just above 50%, according to Department of Agriculture figures. In 2009, it was lower than 50%. The lack of “market demand” means lower cash bids for meat on the spot market. Lower spot prices means meatpackers pay less under their long term contracts (which are benchmarked at so many $ or ¢ a pound over the spot price), for cattle. 

In October 2010, Christopher Leonard of the Associated Press interviewed cattle producers in the nation's big ranching states who reported having no choice but to sell the vast majority of their cattle to one buyer. The Associated Press confirmed the trend in the business records of several ranchers who opened their business records to them.

The struggle to get a competitive price, they say, is helping to push thousands of producers out of business. "When the marketplace is not profitable, the only recourse a producer has is to cut the cost and try to produce more pounds with less money," said Bill Bullard, chief executive officer at R-CALF USA, a Montana-based trade group that represents cattle producers. An AP analysis of shipping logs and sales receipts confirmed their accounts. The complaints have also drawn the interest of federal regulators, who are investigating possible antitrust violations in the meatpacking industry. Cattle producers suspect meatpackers are quietly cooperating to keep prices low in an area that stretches from Kansas to Nebraska and South Dakota, the region that dominates U.S. cattle production.

Industry representatives insist there is no collusion and that the dwindling number of bids reflect broader changes in the way beef is bought and sold throughout the nation. In 2008, according to GIPSA, the nation's largest meatpackers bought about half of their cattle under long term contracts with large producers and half their cattle on the cash market.

 In the cash market, feedlots notify meatpackers cattle are for sale and receive bids for the animals. But, the largest companies have increasingly avoided that market in recent years, buying more cattle through prearranged deals with individual feedlots or ranchers. Critics say that with the biggest companies buying fewer cattle on the cash market, prices have dropped, hurting smaller feedlots and ranchers who don't have deals with the large meatpackers. Cash market prices have decreased by about 5 percent over the past two decades, said Robert Taylor, a professor of agricultural economics at Auburn University.