Another Alternative Solution

[rsomer]

This is another option that might be considered if producers are concerned about establishing a maximum basis that the packers can deduct. That would be to put in place basis insurance that the feedlots could purchase. This plan would surely involve government who would underwrite a program to insure the basis off of the U.S. Live Cattle Futures. Feedlots would pay a premium to be guaranteed a basis level. If the basis was narrower the feedlot got the higher price, if it were wider the insurance would make up the difference.

Upside is this would be easier to implement, downside is the flow of producer and government money to the packers would continue unabated, very well might get worse if the border did not open and competition in the marketplace was not restored. This option has no ability to deal with a backlog of cattle coming onto market too fast unless producers felt the border opening was just about around the corner (sound familiar?) and that worked to hold cattle back. The price packers pay for fats could very well fall dramatically and insurance payouts could be huge. Still the market place would otherwise function and feedlots would be able to hedge this falls calf purchase and prices for weaned calves would be higher than they would be with no program in place and the border still closed. If the border were to open in time this program might work to support the cattle industry at no cost to government although it leaves the packers in a real position to abuse this insurance if the border did not open.

For those concerned that the feedlots would not pass on the benefits of this program or the other alternative, fixing the basis the packers can charge, the option to retain ownership and feed you own calves would seem to be the solution.

Which program would you prefer to see? Insurance to establish a basis underwritten by government or somehow establish a maximum basis the packers can deduct, either by consensus and persuasion or failing that some kind of legislation?

Something needs to done so the feedlots can limit their basis risk otherwise the price paid for calves this fall will be more than disappointing if the border is not open and there is no optimism that it would open soon. At this point I think no one will buy calves on optimism and feedlots would almost need a guarantee, optimism has gotten feedlots and the industry nowhere.

[farmerfudd]

I would like to see a law that prevents foreign ownership of cattle. Down south you can't buy them, so there is lots of speculators coming north and getting idol lots to fill up with almost anything using U.S. green. You can't buy land like that,it should be the same for cattle in these circumstances.

[InAHurry]

That might be a tough one to swallow ... for the producer that received an extra buck or two on his calves - which may have been bought by foreign interests or perhaps they supported the price paid just by bidding. If the number of cattle supposingly owned by US buyers at this time is half way correct we can't be naive enough to think that they didn't contribute to the market $ of the day.

Far be it for me to suggest that this is the wrong direction, I'm still trying to understand and weigh all the options and how they will effect me tomorrow or 5, 10 years down the road.