-iMcasterFj
106
NCA views oil beef pricing
and reporting systems told
WASHINGTON, D.C., ~
Beef pricing and reporting
systems need certain im
provements as the industry
continues to change; but, in
the main, the current
systems have relected
changes in supply and
demand and have served the
industry and consumers
well.
This was pointed out today
by the National Cattlemen’s
Association. In testimony
before the U.S. Department
of Agriculture’s Beef Pricing
and Reporting Task Force.
No valid evidence has been
presented to support
allegations that beef prices
have been illegally
manipulated, NCA said, and
proposed legislation im
posing government controls
on the beef marketing
system would create more
problems than they would
solve.
NCA’s views and com
ments, presented by
Marketing Committee
Chairman Tom Remington,
were based on an extensive
analysis of industry
developments and
allegations about beef
pricing which have been
made by politicians and
others. The task force’s
Washington hearing was the
last of a series held before
the task force reports to
USDA, which will use the
information and advice in
responding to legislative
proposals.
NCA
the task force included:
The task force should note
that there is no valid
evidence that prices have
been illegally manipulated
or that prices reported by
the reporting services have
been inaccurate.
The task force should
recommend against any
attempt, legislation or
regulation, to have govern
ment force new marketing,
pricing or reporting systems
upon the industry. It should
oppose H.R. 91, introduced
by Congressman Neal
idatums to
Smitb-a bill which would put
all aspects of meat
marketing under govern
ment regulation.
As the wholesale beef
market continues to evolve
from a carcass to a
fabricated (boxed) beef
market, new price reporting
tods need to be developed.
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NCA will assume a
leadership role in bringing
industry together to develop
an accurate method of
determining a carcass
equivalent price based on
prices received in the
fabricated beef market.
Voluntary cooperation by
meat sellers and buyers in
reporting wholesale beef,
prices should be encouraged.
The task force should: (1)
Point out the Schilling ef
fect” upon voluntary
reporting which results from
civil suits alleging anti-trust
activities' and price fixing.
(2) Recommend that the
USDA Market-News Service
publish names of firms
refusing to voluntarily
confirm prices or to report
prices when called.
New marketing in
novations should be en
couraged and tested, elec
tronic marketing > is one
possible innovation, and its
refinement and testing
should,be encouraged, hut
not to die exclusion of other
potential marketing
systems.
Significant structural
changes are occurring in the
beef industry. USDA should
do more to provide timely
information to the industry
such as monitoring and
periodically reporting the
extent of formula vs.
negotiated selling of beef
carcasses and fabricated
cuts.
Here are additional points
brought out by NCA;
Despite actual or alleged
shortcomings of the present
pricing and reporting
systems, the systems have
reflected long and short
term changes in supply and
demand. Consumer beef
supplies have been
relatively dependable;
changing supplies have been
rationed or liquidated by
changes in prices. The
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current free market should
be allowed to continue to
evolve and operate with a
minimum of government
interference.
With a rapid increase in
use of boxed beef and other
fabricated products, the
wholesale beef trade is
becoming much more than
just a carcass beef trade.
Analysis of data on sales
qualified to be used in
reporting carcass beef
prices shows that the
reporting services are doing
a creditable job of
measuring that portion of
graded* carcass beef traded
in carlots on a negotiated
basis. Based on data from
' USDA’s recent beef pricing
report, the Yellow Sheet
sample represented about 24
per cent of qualifying sales.
However, the advent of
central fabrication and
formula pricing are
diminishing the validity of
carcass beef prices as the
basis for the entire market.
Meanwhile, USDA’s beef
{Hieing report does not
substantiate the allegations
of impropriety against the
. reporting services, including
the Yellow Sheet.
The packing industry now
has substantial excess
capacity. With some plants
much less efficient than
others, plant closings and
packer failures will present
a significant problem. The
possibility of growing
concentration in the packing
industry is a valid concern.
However, current con
centration of beef slaughter
is less than existed in the
1950's and 1960'5.
Approximately two-thirds
of the carcass beef is sold on
a formula basis (with prices
based on reporting service
qqptetions on day of sale).
However, carcass beef now
represents, at most, only
half of the wholesale beef
trade. The other lialf is sold
as fabricated beef, of which
85 per cent is sold on a
negotiated basis. At a
minimum, 55 per cent of the
total wholesale beef trade
involves negotiated pricing
or much more than sonte
critics and politicians have
claimed. For many smaller
packers and buyers, formula
buying or selling, involving
standing orders, is an
economical way to trade
beef. At this time, NCA
cannot support a ban on
formula pricing, but feels
that the basis for price
reporting needs to be
enlarged.
Within a few years, the
carcass beef .trade will
become predormnatly a raw
,product market for
fabricating operations. What'
will be needed most in price
reporting is an expanded and
comprehensive reporting
system for fabricated cuts.
Mandatory reporting of all
meat trade, with more
government control and red
tape, would create more
rather than fewer problems
for the industry and the
public. Attempts to license
market new
publications also would
present problems.
Establishment of an ex
clusive government
reporting service would
provide the potential for
political manipulation of
prices.
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