Ranching the Government
Like commodity crop farmers, will the few remaining ranchers be forced to look to government rather than a competitive market for their income?
By Gilles Stockton
January 18, 2025
Is this what it is coming down to? From here on, will we be “ranching the government?” Grain farmers seem to be totally dependent upon government checks to make it from harvest to the next planting season. Is this what is in store for ranchers too, because that appears to be the priority for the National Cattlemen’s Beef Association (NCBA) and its affiliate the Montana Stockgrowers Association (MSGA).
The Federal Agriculture Improvement and Reform Act of 1996 is when crop insurance became the main avenue for government subsidies. Insurance, such as for hail, had been available since way back when, but insurance to protect all risks – including low prices – became the main focus of farm policy after 1996. Before, there was talk about how to reform the markets for corn, soybeans, wheat, and cotton. But that talk has just sort of faded away. Our government now pays sixty-two percent of crop insurance premiums, costing taxpayers about ten billion dollars a year.
Ranchers, however, continue to be dependent upon a fickle market as our main source of revenue. The government checks we receive come mainly in the form of subsidies for putting in things like pipelines and wells. To be sure, every time the weather really hammers the rangelands, some kind of disaster payment comes our way. More recently, crop insurance for hay and pasture has been offered, but cattle markets continue as our main income source.
But is this about to change? According to the NCBA and MSGA policy priorities it is. The newest insurance available is Livestock Risk Protection (LRP). One of the policy priorities for the Montana Stockgrowers Association (MSGA) in their Producer Profitably meetings held last summer, is an increase in government subsidies for the Livestock Risk Protection insurance. What is not included in the MSGA policy priority list is livestock market reform.
Last October of 2024, USDA acknowledged that price discovery in the fed cattle market is broken. In an Advanced Notice of Rulemaking “Price Discovery and Competition in Markets for Fed Cattle,” USDA revealed that in the Texas/Oklahoma marketing region, the packer’s use of the negotiated spot market fell to as low as 2.6%.
This means that for a period of time, 97.4% of fed cattle in Texas and Oklahoma were acquired through captive supply, with Alternative Marketing Agreements (AMAs), being the main mechanism. Feeders sent their steers to the packer to be killed and were paid based on the prices for the 2.6% that were purchased on the negotiated spot market. Needless to say, the validity of those prices was open to question.
Cattle producer organizations were invited to provide feedback on the Advance Notice of Rulemaking to inform USDA as to the best avenue to restore honest price discovery to the fed cattle market. The NCBA comment was: “We respectfully request the Service take no further action on this proposed rule.” They were given an opportunity to fix the dysfunctional cattle market and the NCBA said – “no thank you!”
It should also be noted that the American Farm Bureau (AFB) comments were not much better. The AFB wrote: “…proposed rulemaking…may impact AMAs and the ability for a producer to enter into a mutually beneficial contract with a packer.” Apparently, these two organizations are not bothered that over the last 12 years, more than 48,000 independent feedlots went belly up because the prices for fed cattle did not cover the cost of feeding them.
The NCBA’s, the AFB’s, and, apparently, the MSGA’s solution to an increasingly rigged market for fed cattle is government subsides. That certainly fixes the problem, just as it did for corn, soybean, wheat and cotton farmers. From here on, ranchers and feeders need only – “ranch the government.”
Gilles Stockton
Grass Range, Montana