Cows and calves in field.

What’s in USDA’s Cattle Contracts Library?

Lee Schulz, ISU extension livestock economist


The Consolidated Appropriations Act of 2022 directed USDA’s Agricultural Marketing Service to create a Cattle Contracts Library Pilot Program. Its goals are to:

· Increase market transparency.

· Improve price discovery.

· Provide enhanced signals to producers with respect to output and better insights regarding market demand and supply for cattle.


Under this pilot program, AMS collects, maintains, and reports aggregated purchase information on contracts between fed cattle producers and packers who are within the reporting threshold. Data are published every Monday for the prior week’s trade.


The Cattle Contracts Library Summary dashboard provides the most recent and historical data. The Cattle Contracts Library Pilot Program webpage provides all supporting information.


For the week ending March 31, 2023, there were 184 active cattle contracts. Some of these contracts may have one base price. Others may have several base price options. For example, one contract may have both a USDA report as a base price option and a CME price as an option. Those 184 active cattle contracts offered 232 base prices. A USDA report was the most used base price at 75.54% of contracts using it, 10.30% of base prices were based off the CME, 9.01% were negotiated, and 3.86% were top of market. A USDA report may be used to help identify the top of market. The base price source breakdowns add to 98.71%, which is by design, to maintain confidentiality. Because confidentiality is applied throughout the report, not all data may be shown or totals may not add up to 100%.


The base price source breakdowns were slightly different when looking at the number of head represented which are reported by month. In February 2023, 700,194 head (79%) had a USDA report as a base price, 105,629 head (12%) used a negotiated base price, 62,391 head (7%) were top of market, and 13,728 head (2%) used the CME for a base price for a total of 881,912 head.


Of the contracts using a USDA report to establish a base price, which could include top of market contracts, 35.95% used the Nebraska Weekly Direct Slaughter Cattle Negotiated Purchases (LM_CT158) report, 33.88% used the Kansas (LM_CT157) report, 23.55% used the Texas-Oklahoma-New Mexico (LM_CT156) report, 4.96% used the 5 Area (LM_CT150) report, and 1.24% used the Iowa-Minnesota (LM_CT167) report. Note that while a Nebraska report, for example, could be used to establish a base price, the cattle may be fed somewhere other than Nebraska.


Of all the contracts, 27.59% had a base price adjustment. For negotiated base prices, this adjustment had a simple average of $0.65 with a 25 to 75 percentile range of $0.48 - $0.97. The units are $/cwt. The percentile range is used to ensure confidentiality. For CME base prices, the average adjustment was $1.00 with a range of $1.00 - $1.00. For top of market base prices, the average adjustment was $1.27 with a range of $0.77 - $1.50. For USDA report base prices, the average adjustment was $1.10 with a range of $0.41 - $1.71. All of these contracts then had premiums and discounts applied. For USDA report base prices, with no premiums or discounts applied, the average base price adjustment was $1.43 with a range of $0.81 - $2.24. Of all the contracts with base price options, 93.97% had at least one premium or discount applied for yield grade, quality, weight, class, branded programs, management programs, or other factors.


The contract specs part of the report shows that 88.59% of contracts had a quality specification, 84.24% had a specification for weight, 76.09% for less than 30 months of age, 61.96% for other miscellaneous, 54.89% for yield grade, 48.37% for branded, 40.76% for dressing percent, 38.59% for breed, 33.70% for export certification, 8.70% for starter cattle, 7.61% for volume threshold, and 4.89% for supply relationship.


Beef/Dairy crossbreeding is a growing practice. However, the degree of substitutability at the fed cattle level has not been widely known. Beef/Dairy cross discounts on a per head basis were $20.00 and on a per cwt basis averaged $2.91 with a range of $1.75 - $4.13 according to the Cattle Contracts Library. This compares to an average per cwt dairy type discount of $28.62 with a range of $11.72 - $40.00.


This is a pilot program. The funding will eventually run out. The program could cease, or could become permanent, subject to funding and support. AMS will continue collecting feedback.