R-CALF USA requests probe into cattle price collapse
January 10, 2016
Billings, Mont. – In a formal request sent Jan. 5, to the U.S. Senate Committee on the Judiciary (Committee), R-CALF USA seeks an investigation into potential antitrust and anticompetitive conduct in the U.S. cattle and beef markets. The group is asking the Committee to investigate 13 specific issues including the cause for the dramatic, unprecedented collapse of U.S. cattle prices in 2015; whether there are structural problems in the U.S. cattle market that contributed to the price collapse in 2015; and whether dominant meatpackers or other major market participants engaged in unlawful conduct that adversely influenced the cattle futures market and cash cattle market in 2015.
In its highly detailed and well-documented request, the group provides evidence indicating that antitrust and anticompetitive conduct by dominant meatpackers and certain traders in the cattle futures market in 2015 caused a severe anomaly in U.S. cattle markets. That anomaly, according to the group, caused an "unprecedented extraction of equity from the U.S. live cattle industry" and harmed consumers as well.
As background for the Committee, the group explained that extremely tight cattle supplies and growing beef demand were among market fundamentals cited by analysts to support projections for strong cattle prices throughout 2015 and for up to three years beyond. During the first half of 2015, those projections were spot-on, the group stated.
"But then something went awry," The group wrote adding that in the latter part of 2015, "cattle prices collapsed farther and faster than during any time in history and the unprecedented volatility in the cattle futures market rendered it useless for price discovery purposes."
The group provided documentation showing that independent cattle feeders lost more than $500 per head of cattle sold during the collapse and, consequently, "the very foundation of the U.S. cattle industry's feeding sector – its independent cattle feeders – was irreparably damaged."
But as cash cattle prices plummeted and cattle futures prices fluctuated with extreme volatility, dominant meatpackers were benefiting from what one industry commentator referred to as 'gangbuster profits.' Meanwhile, consumers continued paying at or near record high prices for beef.
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In further support of its request, R-CALF USA states that analysts are characterizing the 2015 price collapse with nondescript phrases such as 'market meltdown' and 'psychological upheaval,' indicating that they either do not know or they will not say what actually caused the catastrophic price collapse.