RECORD livestock prices has meant issues around market transparency and government intervention in the way cattle are sold have been pushed to the back of producer minds in recent times.
There's not likely to be much farmer appetite for legislation against price gouging when it could also mean capping the skyrocketing rates young cattle are going for.
In the United States, however, politicians are pushing way ahead on mandating competitiveness and transparency into cattle markets.
Two bills are fast advancing through the US Senate Agriculture Committee.
The Cattle Price Discovery and Transparency Act 2022 proposes a mandatory minimum threshold for the percentage of cattle purchased under negotiated grids and expansion of data collection requirements for cattle pricing and slaughter, among other things.
The Meat and Poultry Special Investigator Act of 2022 establishes within the Department of Agriculture a designated expert to investigate and prosecute claimed violations of competition law by packers and live poultry dealers.
ALSO IN BEEF:
The issue
In order to have robust price discovery that provides accurate information about market dynamics, a competitive cash market with multiple price discovery points is a must.
Participant numbers in the US negotiated cash cattle market - the spot market - are declining. The spot market is increasingly being replaced by formula pricing, forward contracts and longer-term marketing agreements.
The problem is, the bulk of formula pricing uses the spot market as the 'going rate', which means even though spot market purchases are declining in volume they are being heavily leveraged.
Effectively, packers are using the cash market to set the price for large portions of cattle bought but they are not participating in that cash market, thereby adding competition that would otherwise drive prices up.
The argument is that it's a 'cosy relationship' between large meat packers and big cattle feedlots that comes at a disadvantage to the smaller independent producer selling on the spot market.
This is what the Biden administration is trying to address.
What's interesting is that both packer and producer advocacy groups in the US are fighting the government intervention, essentially arguing supply and demand forces should be let be as they will always drive efficiency and thus profitability.
The National Cattlemen's Beef Association says longer-term marketing agreements provide stability to producers and allows them to invest in creating higher-quality and specialty products that command a premium.
NCBA vice president of government affairs Ethan Lane said cattlemen and women deserve the freedom to market their cattle in whatever way they want.
"Cattle markets are finally returning to normal after pandemic-fueled uncertainty, but these heavy-handed mandates will stifle innovation and limit marketing opportunities," he said.
The North American Meat Institute says strengthening of consumer demand for beef over the past couple of decades has occurred alongside increased use of formula pricing that rewarded quality improvements.
Eroding the ability of consumers, retailers, and packers to incentivise quality through vertical coordination may have detrimental impacts on demand, it says.
Australia's story
Exactly the same arguments have been made in Australia whenever the push for government intervention in cattle markets has gained momentum.
While the level of beef processing concentration here is not as high as the US, the lack of trust between processors and producers has been around for decades and sparked a senate inquiry into the effect of market consolidation in the red meat processing sector in 2016.
The key recommendation was that a transparent pricing mechanism be introduced at livestock saleyards and that Meat & Livestock Australia establish a mandatory national price disclosure and reporting system.
It found no political appetite.
While MLA has significantly ramped up its national indicators, its over-the-hooks reporting still relies on voluntary contributions from processors rather than actual objective transaction data.
Some processors have also made their grids publicly available, but not JBS, the largest.
Within both processor and producer circles, the belief is strong that brand-based marketing is the solution to evening out the peaks and troughs of the cattle market.
The argument is that if a person is producing livestock, he or she needs to understand what the buyer is chasing and what they will pay for.
The line of thinking is that delivering on end consumer demands is the only path to long-term price viability and prosperity for all along the supply chain; not government intervention in markets.
Australian industry leaders and analysts say that what is driving the US bills is consumer rights lobbying as retail beef prices go through the roof, along with a Biden-led taste for legislating 'fair play'.
As Australian retail beef prices continue to go up, similar pressure could mount here.
Certainly the labour shortages in abattoirs that drove supply chain disruptions and the massive gap between retail beef prices and farmgate prices in the US exist here.
A Labor government might also be more Biden-like in its thinking.
It's in the Australian beef producer's interests to watch closely the unfolding US situation and to consider what similar legislation might mean for his or her business.