Funding approval: Cattle contract library pilot program in spending bill receives support

Washington, D.C. – On March 15, the president signed into law the “Consolidated Appropriations Act, 2022,” which provided a full year funding for projects and activities of the federal government. The Fiscal Year (FY) 2022 omnibus appropriations package will include $1.5 trillion in FY spending, an increase of $11.3 billion from FY 2021 funding. Funding will be distributed for a variety of departments – all 12 FY 2022 appropriations bills and supplemental funding, in addition to $13.6 billion to support Ukraine. 

National Cattlemen’s Beef Association (NCBA) Director of Government Affairs and Marketing Regulatory Policy Tanner Beymer shared how the cattle contract library pilot program within the bill will benefit the cattle industry. 

Purpose of pilot program  

“The contract library is an online database warehoused at the U.S. Department of Agriculture (USDA) which contains a detailed, searchable database with types of contracts offered by packers to cattle feeders for the procurement of finished cattle,” said Beymer. 

For example, a formula contract can be structured in many ways but if there is a high volume of contracts with an established, specific base price or incentivize quality grade or dressing percentage, it will help producers get a sense of what is available to them in terms of pricing fed cattle, he noted. 

“What is included in the FY 2022 spending package is this cattle contract library concept,” he continued. “USDA received a million dollars to do a pilot of a contract library with funding available until Sept. 30, 2023.” 

The next steps will include putting together a pilot library to identify its regulatory framework and solicit industry feedback. 

“This is basically a way for USDA to study how to start a program in the event the legislation passes a bill to make the library permanent.” 

Addressing market issues 

“Market transparency is a major area of focus in the cattle market and the contract library has been a part of the focal point of those market transparency efforts,” added Beymer. “Roughly 80 percent of fed cattle marketed in this country is done so on a formula basis [the advance commitment of cattle for slaughter by any means other than negotiated grid, negotiated cash transaction or forward contract].  

The idea behind the library is to allow producers to see these contracts and be able to make changes in the operation in an effort to capture additional value, he explained.  

“The program is expected to provide additional opportunities for producers to capture more value,” he said. “It’s not expected to provide additional price discovery or increase a cattle producer’s leverage in pricing negotiations, but has the potential for producers to identify ways they can make changes in their operation. It is a significant step in the right direction to bring some more transparency to the market, particularly as it relates to formula transactions.” 

Next steps

If the bill is passed into law, the next step is for the USDA to start the program and explain how it’s going to work. 

“NCBA anticipates USDA will do some engagement with stakeholders – what the industry would like to see in a contract library, and NCBA is prepared to ensure stakeholders and affiliates are aware of what is going on moving forward,” Breymer said. 

“NCBA predicts the contract library will help provide clarity and still allow for alternative marketing agreements,” added NCBA Vice President Mark Eisele. 

Brittany Gunn is the editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.