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AFBF economist analyzes cattle industry’s cash trade issue

An American Farm Bureau economist says establishing a mandatory minimum for negotiated cash trade in cattle markets could result in negative consequences for the cattle industry.

Michael Nepveux, who has written a “Market Intel” report on the issue, says it would likely mean more government intrusion into the industry.

“The issue becomes, who is going to mandate it—and whenever you have a mandatory minimum, it starts to invite further regulation upon the industry,” Nepveux says. “And who is going to enforce that—the federal government is going to have to be the one involved there.”

Nepveux says while enhanced price discovery is a good thing, it does not necessarily mean it will result in higher prices, as some proponents of minimum thresholds contend.

“Price discovery is not the same as price determination and what’s going on with fundamental supply and demand,” he says. “So I’m not saying it won’t result in higher prices, I’m just saying that may not necessarily be the case.”

Nepveux says Farm Bureau policy supports the rights of producers and packers to enter into formula pricing, grid pricing and other marketing arrangements, and opposes a mandatory minimum for negotiated cattle slaughter.