USDA launches pilot cattle contracts library
On Jan. 31 the USDA launched its pilot Cattle Contracts Library on the Agricultural Marketing Service (AMS) Cattle Contract Library webpage.
The Consolidated Appropriations Act of 2022 directed USDA to create a pilot library to increase market transparency for cattle producers. This pilot library will provide new disclosure to the industry and public regarding the key terms, conditions, and volumes under which cattle are contracted, bringing sunshine to practices in what is now the largest part of the cattle market. According to the USDA, this will empower cattle producers to negotiate better terms, more carefully monitor risks relating to marketing preferences and pricing practices, and ultimately take better advantage of market opportunities to produce cattle that the market demands.
The library will have the same look and feel as the working library model developed and shared with stakeholders last year but will now be populated with information from active contracts. Packers that slaughtered an average of not less than five percent of the number of fed cattle slaughtered nationally during the immediate preceding five calendar years were required to submit this information to AMS, as outlined in a final rule published Dec. 7, 2022, and that became effective on Jan. 6.
The initial release of the library will allow users to browse a range of terms and information contained in active contracts used for the purchase of fed cattle. In addition to active contracts in use, the library will provide information on terms most commonly used in cattle contracts, such as base price determination, base price adjustments and selling basis options; contract specifications for such things as quality, yield, breed, weight, delivery, financing, profit/risk-sharing, and more (where present in a contract); and the full range of premiums and discounts used in final price determination.
Upcoming enhancements to the library will display information on the number of head of cattle moving through current contracts defined by contract base price source, including the actual numbers for the prior month and estimates for the current month. Additionally, volume information by contract specification for quality, breed, weight, source-verified and others will provide users with information about how often each specification is used. During the term of the pilot, AMS expects to further enhance transparency through additional reports and features as they are developed, subject to confidentiality.
With the library, producers will be able to see a much more complete picture of marketing practices and trends, including upcoming volumes. This transparency will empower producers to take advantage of new economic opportunities, improve their marketing strategies, and manage risks relating to contractual terms including pricing references on which they rely.
AMS will conduct a series of meetings and webinars in the coming weeks and months to help stakeholders understand how to use the pilot library.