The USDA’s Agricultural Marketing Service this month released a study of current US mandatory fed cattle price reporting and has announced its intentions to hold a stakeholder meeting of the study’s findings and recommendations.
An AMS release said the meeting was to be held on Dec. 12 at the USDA’s National Grain Center in Kansas City, Mo.
The study was conducted by Agricultural Economists Ted Schroeder and Glynn Tonsor, of Kansas State University and Lee Schulz of Iowa State University.
The study explored the feasibility of reporting negotiated slaughter cattle purchases in separate zero- to 14- and 15- to 30-day delivery periods and the possibility of realigning the states included in the USDA’s five-area reporting region, all while maintaining the confidentiality requirements found in the Livestock Mandatory Reporting statute. They used data from 2014 through 2018 in their study.
FINDINGS AND RECOMMENDATIONS
The economists found that the value of reported market information depends on the level of aggregation in the reported data. Aggregating transactions across geographic regions with markets that are not well integrated can reduce the value of the information.
With that in mind, the trio came up with some recommendations.
–Reporting of 15- through 30-day delivery periods separately from zero- to 14-day periods if feasible only on a national reporting basis but is not feasible for regional market reports. For instance, in the Iowa/Minnesota area, 15- to 30-day trades could be reported about half of the time and maintain confidentiality, but the two delivery windows could be separated in other regions only about 20% of the time, at best, regardless of how alternative states in the region were aligned.
–However, the economists recommended realignment of fed cattle market reporting areas for reasons other than reporting 15- through 30-day trade separate from zero- to 14-day.
They suggested adding South Dakota and Illinois to the Iowa/Minnesota regional market report. South Dakota had the fourth largest volume of negotiated trade of all states, and Illinois was next in terms of volume for states not currently included in regional reports.
The economists also suggested combining Colorado’s negotiated cattle trade reporting with Wyoming. The markets appeared to have similar pricing patterns, and combining these states would reduce confidentiality constraints for the Colorado market. However, there likely will still be weeks in which market information is not reportable to maintain confidentiality.
They suggested leaving Nebraska and Kansas regional markets as they are. There are no other states that would enhance the price-reporting quality, but neither of the two markets are reportable for 15- to 30-day transactions.
Kansas could be combined with the Texas/Oklahoma/New Mexico, but doing so would reduce the quality of information and the average price contained in the Kansas report, and it would not add enough volume to the Kansas negotiated trade to justify the move.
The Texas/Oklahoma/New Mexico region has similar challenges to Colorado/Wyoming with few negotiated trades and a concentrated packing sector.
CATTLE, BEEF RECAP
Cash cattle trading last week took place at $115 to $117 per cwt, steady to up $1 from the previous week, and at $180 to $184 on a dressed basis, down $2 to up $1.50.
The USDA choice cutout Monday was up $0.67 per cwt at $233.24, while select was up $0.59 at $211.91. The choice/select spread widened to $21.33 from $21.25 with 88 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Friday was $145.33 per cwt, down $0.15 from the previous day. This compares with Monday’s Nov contract settlement of $141.97, up $2.70.