R-CALF USA: Meatpackers getting too big to regulate
Billings, Mont. – According to R-CALF USA, antitrust and competition enforcement agencies have failed miserably to prevent multinational meatpackers from manipulating cattle prices and controlling the cattle and beef markets, resulting in financial harm to both cattle producers and beef consumers.
“No other conclusion can be drawn from the circumstances unfolding in our cattle market except that the USDA (U.S. Department of Agriculture), DOJ (U.S. Department of Justice) and the CFTC (Commodity Futures Trading Commission) have all failed to regulate the meatpackers and the cattle markets to prevent antitrust violations and anticompetitive practices,” said R-CALF USA CEO Bill Bullard.
Last week’s average cash cattle price was about $1,425 for a 1,300 pound fed steer. This value is $418 less than the same time last year.
According to the USDA the production cost for these cattle is $1,565 per animal, meaning cattle feeders lost $140 for each fed animal sold last week to the meatpackers. The highly concentrated meatpackers are purchasing and slaughtering about 600,000 cattle each week. Thus, last week the meatpackers acquired their cattle needs for $84 million less than the cattle producers’ cost of production.
Since November 2014, multinational meatpackers have been procuring their cattle needs from U.S. cattle producers at prices that averaged $181 per head per month below the cost of production.
If this is true, then those meatpackers are making gangbuster profits.
They are, according to the CME Group that stated this year’s packer margins “could easily surpass 2015’s level by more than 30 percent and set a new 20-year high beef packer margin.”
This means lower prices paid to cattle producers do not result in lower beef prices for consumers.
Indeed, consumer beef prices during the first half of 2016 averaged about 20 cents more per pound than they did throughout 2014, a year when cattle prices were more than $300 per head above 2016 prices.
Bullard said federal regulators know the marketplace is broken and that multinational meatpackers are engaged in abusive, anticompetitive cattle procurement practices. But, he said, federal regulators are afraid to do anything about it.
“Through their years of inaction, the USDA, DOJ and CFTC fostered the unprecedented concentration of the meatpacking industry that is now too big for them to regulate,” Bullard asserted.
“Secretary Vilsack and then Attorney General Holder both committed to taking steps to improve competition in our cattle industry during their much promoted 2010 joint workshop extravaganzas, but neither has done anything during the past five years to fulfill those commitments.
“In fact, Secretary Vilsack actually recommended that Congress repeal country of origin labeling (COOL), which stripped from U.S. cattle producers their competitive edge in the domestic beef market and empowered meatpackers to substitute domestic production with undifferentiated, imported beef.
“Even the CFTC knows that like the cash cattle market that is now too thin to function as a price-discovery tool, the multinational meatpackers have driven a majority of bona fide hedgers out of the cattle futures market. This is allowing the dominant meatpackers to turn the futures market on its head with just a couple of hundred orders, yet the CFTC remains in a trance-like state of inaction.
“Our cattle industry is in dire need of leadership from federal regulators to restore transparency in the cattle market and stop the abusive cattle procurement practices by the dominant meatpackers. Until that leadership emerges, the CFTC should shut down the cattle futures market that is now being exploited by the dominant meatpackers with impunity,” Bullard concluded.
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