Groups ask DOJ to help investigate packers
The South Dakota Cattlemen’s Association was among a group of 23 groups asking that the US Justice Department get involved in the USDA investigation into meatpacking pricing activity surrounding the coronavirus pandemic.
The organization’s president, Eric Jennings, a Spearfish rancher, said his group is worried that without DOJ’s help, the USDA investigation “isn’t going to produce anything.”
He said that with other similar investigations, results aren’t useful because the researchers explain away the questionable activity “with fundamentals.”
Proving price fixing is difficult, he said, particularly, with high supplies of cattle now and before August Tyson plant fire.
Boxed beef prices, which market analysts were calling “high” in February, have increased more than 75 percent in recent days. Throughout February and March the value hung around $210, bumping up to $224 on April 10, and skyrocketing in the last 3 weeks to $364.62 on April 30. Meanwhile live cattle values the last week of April were reported in the low 90s, down about $25-30/cwt or as much as $400/head from what feeders were expecting this time of year.
“It’s a terrible situation that we’re in with packer concentration,” said Jennings. “It’s a poor system but I don’t know that there is any illegal wrongdoing. They are working under the free enterprise system and possibly doing it illegally, but we don’t know,” he said, pointing out that 2014 was “the worst year for the packers,” adding that they paid significantly more for cattle that year.
Colorado attorney and rancher Korry Lewis said that if the DOJ agrees to help with the investigation, the agency will work “side by side” with USDA in investigating the buying and selling activities of the big meatpackers in recent weeks. She likened it to a local District Attorney helping a sheriff with an investigation.
“Instead of accepting and reviewing a case that’s already been investigated, they would be more proactive so they know what the claims would be,” she said.
Lewis said that with the recent pricing activity following the coronavirus pandemic problems that have closed down several meatpacking plants and caused others to run at less than full capacity, the DOJ would look to see if the plants were justified in their closures or if they were doing so with the intent of affecting prices.
Ag Center reports that over 500,000 head of cattle are backed up in the nation’s feedyards. Iowa cattle feeder Eric Nelson says he is going on 5 weeks waiting on a bid for some slaughter-ready cattle. Nelson says it’s not even about price at this point, it’s about access.
“They are keeping their formula guys happy,” said Nelson, explaining that those feeders who have made “formula contracts” with a meatpacker are more likely to be able to move cattle, and independent feeders like himself, who sell on the cash market, are unable to get bids to sell their cattle. Nelson fears this will force banks to require their cattle feeding customers to gain formula contracts in order to obtain financing. With many cattle organizations seeking mandated “negotiated trade,” Nelson worries that recent week’s actions will have the opposite affect, shrinking the already small percentage of cattle sold via negotiated trade. Even if they wanted to, not every feeder will achieve a formula agreement, so if the current price collapse doesn’t put them out of business, the lack of financing could.
“If guys like me aren’t on the seats in Ft. Pierre, Platte, St. Onge, bidding on calves, you can’t imagine how bad the market will be,” he said.
Jennings said he’d be surprised if the investigators find any wrongdoing.
Along with the SDCA, the following groups signed a letter requesting the DOJ’s help in the investigation. Alabama Cattlemen’s Association; Arizona Cattle Growers’ Association; Arkansas Cattlemen’s Association; Georgia Cattlemen’s Association; Hawaii Cattlemen’s Council; Illinois Beef Association; Iowa Cattlemen’s Association; Michigan Cattlemen’s Association; Minnesota State Cattlemen’s Association; Mississippi Cattlemen’s Association; Missouri Cattlemen’s Association, Montana Stockgrowers Association; North Carolina Cattlemen’s Association; North Dakota Stockmen’s Association; Ohio Cattlemen’s Association; Oregon Cattlemen’s Association; Tennessee Cattlemen’s Association; Utah Cattlemen’s Association; Washington Cattlemen’s Association; West Virginia Cattlemen’s Association; Wisconsin Cattlemen’s Association; and Wyoming Stock Growers Association.
Cattle organizations are complaining loudly about reports of 25 tons of boneless beef entering this country from Namibia, South Africa, and R-CALF USA criticized increased amounts of imported beef and live cattle from in March and April – the equivalent of 1.6 million head of cattle entered the United States in those two months.
R-CALF USA and USCA say they welcome the inclusion of the DOJ in the USDA investigation as well.
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