Riding Out the Storm Kendal Frazier, NCBA CEO
Published on Mon, 11/07/2016 - 4:28pm
By any account or measure, this has been a challenging year for the cattle industry. As cattlemen and women, we understand correction in the market, but this year we’ve seen volatility that feels more like a hurricane than a shift in wind direction. Challenging times bring out the best and worst in people, but the cattle industry is always resilient and able pull together, moving forward by sticking to the bedrock principles that unite us.
At the core of our beliefs is the understanding that limited government is the best government. Whether we’re discussing labeling programs, land management or market volatility, the position of cattlemen and women boils down to a desire for solutions that limit the role of government and provide maximum freedom. When I look at that rubric and apply it to the challenges we face, it still holds true. Limited government in the face of these issues puts cattle producers and the rural economy on a path to recovery.
The fact is, cattle producers are grappling with volatile markets and prices that are a fraction of what they were just one year ago. But rather than respond to this by asking for government intervention, federal investigations or price supports, NCBA is focusing on efforts which will build demand and expand our markets. Opening and expanding market access for U.S. beef overseas will increase demand. In fact, increasing demand supports higher prices, even when supplies grow. With the largest per-capita protein supply we’ve seen in many years just ahead, access to the 96 percent of the world’s consumers that live outside our borders is increasingly important. That is why passage of the Trans-Pacific Partnership and opening China are vital for our industry and top priorities for NCBA.
On the topic of market volatility, NCBA hasn’t called for investigations and we haven’t initiated a witch hunt to scapegoat some mysterious market manipulator that doesn’t exist. Instead, we continue to work with the CME Group to add messaging limits, a tool other commodities already had in place. And we’re working with CME to ensure our markets remain commodity deliverable, not cash settled. We’re also evaluating ways to make certain that contract specifications match the current reality of the marketplace. Creating solutions that allow cattlemen and women to adapt quickly to a changing marketplace allows us to make a difference, rather than putting forward tired and worn-out solutions that won’t solve our problems.
During meetings with our members over the course of the past year, it became clear that a push for a stronger cash market would help address many of the market volatility issues we are facing. These conversations ultimately led to the establishment of the Fed Cattle Exchange through Superior Livestock. This tool is listing an ever-increasing number of fed cattle and every major packer is currently using the platform to source cattle. In September, the USDA’s Agricultural Marketing Service announced that the results would be included in Mandatory Price Reporting, adding to transparency and price discovery in the market. While the exchange isn’t the only solution to increasing cash trade, it is a step in the right direction and it’s providing producers with real time guidance as they market their cattle.
Tough times build character and the cattle industry has always had character in spades. Although political change is coming, we can’t be certain about its impact on the challenges to our business. However, I am confident that no matter which way the political winds blow, NCBA will be there to represent the interests of our members. We’ll ride out the storm together as an industry and be stronger for having been through it.