Ag economists weigh in on cattle price discovery legislation
There have been several bills introduced in Congress to improve price discovery in cattle.
But, ag economist John Anderson with the University of Arkansas says the question the industry needs to ask – is it being hurt by the decline in cash trade and increase in formula pricing?
Anderson says “My concern about legislation that gets too prescriptive – pricing innovation can be very important to the industry. Being able to evolve in the way we value cattle and the way we communicate value along the supply is really, really important.”
On Brownfield’s recent Quarterly Market Outlook Anderson said there could be unintended consequences with a legislative mandate, “I would encourage everybody around this issue to really tread very carefully and think very systematically about how anything we do is going to influence incentives and how it might affect incentives for pricing innovation.”
University of Missouri’s livestock economist Scott Brown says increasing the volume of cash trade doesn’t necessarily mean better price discovery, “It doesn’t take very many transactions to get adequate price discovery, but it’s worth a lot of discussion for the cattle industry, generally, to have this. Are we getting adequate price discovery given how we’re doing it today or do we need legislative fixes to try to help?”
Anderson says a legislative solution isn’t likely to happen in 2020 and would have to be picked back up when the new Congress convenes in 2021.