Packers: COOL repeal caused cattle market drop
As expected, the legal team for the four main packers filed a motion to dismiss the class action anti-trust case alleging they colluded to lower prices from Jan. 1, 2015 through the present.
Within the Sept. 13, 2019, document, is found something surprising. On page 30, in defense of the packers’ strategic importation of cattle, the document says that any increase in imports was done legally. They go on to say that during the time the mandatory Country of Origin Labeling was fully enforced, domestic feedlots were able to “charge higher prices than foreign feedlots because of the premium paid for domestic beef.” The document then says that repeal of the mandatory Country of Origin Labeling law affected cattle values significantly. “After the rule was repealed, foreign beef no longer had to be labeled as such, which spurred additional imports and caused domestic cattle prices to fall,” says the motion.
Jayson Lusk, Distinguished Professor and Head of the Agricultural Economics Department at Purdue University, has written about his interpretation of the data. He does not believe mandatory country of origin labeling impacted U.S. cattle prices in a positive way.
“Looking at cattle prices, one can see how the claim that the repeal of MCOOL caused a drop in cattle prices came about, as the repeal came right after the peak of fed steer prices, after which prices began to fall rather dramatically,” he said in a 2016 blog post.
“What started happening at almost the exact same time MCOOL was repealed? Producers started marketing more cattle. Here’s the thing: one can’t create a fed steer overnight. The production decisions that led to the increase in fed steers around January 1, 2016 would have had to have been made around two years before….was this a “natural” part of the cattle cycle?” asks Lusk.
He determines near the end of his blog post that the market fluctuations were not caused by MCOOL or its repeal. “In summary: while it is conceptually possible that the repeal of MCOOL could adversely affect U.S. cattle prices, any actual effect appears to be quite small (if there is any effect at all). The fact that cattle prices fell immediately after the repeal of MCOOL appears to be a coincidence.”
Mobridge Livestock co-owner Casey Perman, however, agrees completely with the packers’ assessment that the repeal of mandatory Country of Origin Labeling caused a significant and immediate drop in live cattle prices.
“Right there is proof that the packers wanted this to happen so they could cheapen up the American product with cheaper imported beef,” he said.
“They can stick a USDA label on it and distribute it in and out of our country to make it look like it’s US beef with the USDA approved label. It’s a sham, and the packers have reaped the profits for three years.”
Those who say lower cattle prices are caused by a lack of beef demand are uninformed, says Perman, a who operates a cow-calf business along with the salebarn.
“The boxed beef is high in price and high in demand. Folks want to eat beef, but even more they want to know where it comes from. I have always been a firm believer in COOL. Our fruit, clothes, even appliances are all labeled. Why wouldn’t we label the most valuable and greatest source of protein in the world? American ranchers are the hardest working people in this great country. Snow or shine, they make it happen. They bring calves to market with the best of genetics. All we want is the credit for our product. How hard can it really be to stamp it, USA BEEF?”
R-CALF USA was not able to comment on the motion because the lawsuit is ongoing.
The motion argues against the allegations made by R-CALF’s legal team. The opening statement is as follows: “Common sense – and economic theory – dictate that commodity prices follow the law of supply and demand. So when fed cattle prices hit a historic peak in late 2014, driven in large part by reduced supply (caused by a significant drought), the market responded as
expected. Producers increased the supply of fed cattle, and fed cattle prices fell accordingly.”
The packers complain, in their motion to dismiss, about “confidential witnesses” used to argue R-CALF’s case.
They say that evidence was not sufficient to prove conspiracy. “The fact that Defendants took
common-sense actions in reaction to market forces does not permit an inference that they conspired together to do so,” they say in the motion.
The motion goes on to defend the actions of the packers as legal and appropriate.
The legal team representing R-CALF USA and the four cattle feeders will have three months to submit a rebuttal to the motion to dismiss. After reviewing the information, the court will then decide wither the case has sufficient merit to go to trial.