Sandhusker
Well-known member
Tilting at Windmills and Making Straw Men
John Queen is tilting at windmills. Both he and the NCBA he leads are speaking in favor of leaving Alternative Marketing Agreements (AMA’s) alone. All of their presentations give the implication that someone is trying to prohibit AMA’s in the cattle and beef industry. That implication is false. Not a single industry group is promoting such an idea, nor is there a bill in Congress, either already filed or waiting in the wings that would prohibit AMA’s.
Actually, it is a common practice to divert the debate by setting up a straw man argument like this when you have no substantial arguments against your opponent. But what is more humorous is that, in his testimony to Congress, Mr. Queen actually uses an argument that supports the Captive Supply Reform Act (S.960) while ostensibly giving testimony against such reform. He says, “Taking advantage of marketing arrangements such as forward contracting allows producers to make a price that allows them to be profitable. If the price does not fit their needs, they can walk away and find another buyer. Being a ‘price maker’ rather than a ‘price taker’ puts ranchers in control of their business.”
A common type of AMA used by packers is a formula pricing agreement. With such an agreement cattle are sold to a packer without an agreement on the base price. The cattle are then delivered. After they are slaughtered the packer determines the base price through a black box formula. The packer often has influence over some of the inputs to the formula. Premiums and discounts may be applied for quality after the base price is determined. At that point the seller cannot “walk away and find another buyer.” In fact, he has become a “price taker” and not a “price maker.” The Captive Supply Reform Act would disallow the practice of not agreeing on a price beforehand. From his testimony, it would appear that Mr. Queen would welcome a greater opportunity to be the “price maker.”
He also argues in favor of no market reform in order to preserve “choices for cattlemen in the marketing of their cattle.” Were Mr. Queen before the House Committee on Financial Services instead of the House Committee on Agriculture, he would have to be arguing in favor of doing away with rules that prohibit market manipulating activities in the stock market such as insider trading. If freedom to market as we wish is an absolute, then those limitations on Wall Street are wrong, too.
The reckless prohibition of AMA’s that Mr. Queen, the NCBA, the AMI, and RTI argue against has no supporters. But the surgically precise market liberating reforms asked for by our Senators and Congressmen have many supporters and much precedent. They need no more study. They are rational, and they are proven in other arenas. Burn the straw man. Turn your back on the windmills. Let’s make the cattle market like it should. Let’s make it more like the stock market. Let AMA's continue. But prohibit those few practices, like unpriced contracts and preferential contracts, that are not an appropriate part of any free market.
Contact The Stevenson Report by email at [email protected] or view at www.thestevensonreport.com
John Queen is tilting at windmills. Both he and the NCBA he leads are speaking in favor of leaving Alternative Marketing Agreements (AMA’s) alone. All of their presentations give the implication that someone is trying to prohibit AMA’s in the cattle and beef industry. That implication is false. Not a single industry group is promoting such an idea, nor is there a bill in Congress, either already filed or waiting in the wings that would prohibit AMA’s.
Actually, it is a common practice to divert the debate by setting up a straw man argument like this when you have no substantial arguments against your opponent. But what is more humorous is that, in his testimony to Congress, Mr. Queen actually uses an argument that supports the Captive Supply Reform Act (S.960) while ostensibly giving testimony against such reform. He says, “Taking advantage of marketing arrangements such as forward contracting allows producers to make a price that allows them to be profitable. If the price does not fit their needs, they can walk away and find another buyer. Being a ‘price maker’ rather than a ‘price taker’ puts ranchers in control of their business.”
A common type of AMA used by packers is a formula pricing agreement. With such an agreement cattle are sold to a packer without an agreement on the base price. The cattle are then delivered. After they are slaughtered the packer determines the base price through a black box formula. The packer often has influence over some of the inputs to the formula. Premiums and discounts may be applied for quality after the base price is determined. At that point the seller cannot “walk away and find another buyer.” In fact, he has become a “price taker” and not a “price maker.” The Captive Supply Reform Act would disallow the practice of not agreeing on a price beforehand. From his testimony, it would appear that Mr. Queen would welcome a greater opportunity to be the “price maker.”
He also argues in favor of no market reform in order to preserve “choices for cattlemen in the marketing of their cattle.” Were Mr. Queen before the House Committee on Financial Services instead of the House Committee on Agriculture, he would have to be arguing in favor of doing away with rules that prohibit market manipulating activities in the stock market such as insider trading. If freedom to market as we wish is an absolute, then those limitations on Wall Street are wrong, too.
The reckless prohibition of AMA’s that Mr. Queen, the NCBA, the AMI, and RTI argue against has no supporters. But the surgically precise market liberating reforms asked for by our Senators and Congressmen have many supporters and much precedent. They need no more study. They are rational, and they are proven in other arenas. Burn the straw man. Turn your back on the windmills. Let’s make the cattle market like it should. Let’s make it more like the stock market. Let AMA's continue. But prohibit those few practices, like unpriced contracts and preferential contracts, that are not an appropriate part of any free market.
Contact The Stevenson Report by email at [email protected] or view at www.thestevensonreport.com