USDA publishes cattle and beef pricing report

The Agriculture Department’s Agricultural Marketing Service today released the long-awaited report on the cattle markets following the 2019 fire in a meat plant in Holcomb, Kan., and the early stages of the coronavirus pandemic this year.

In a statement accompanying the release, Agriculture Secretary Sonny Perdue seemed to acknowledge that critics of how the cattle markets functioned would not be satisfied with the report.

Perdue said, “The report examines these economic disruptions and the significant increase in the spread between boxed beef and fed cattle prices that resulted from them. While we’re pleased to provide this update, we assure producers that our work continues in order to determine if there are any violations of the Packers and Stockyards Act. If any unfair practices are detected, we will take quick enforcement action.”

“While the report does not examine potential violations of the Packers and Stockyards Act, USDA staff have maintained a cooperative relationship with the staff of the Department of Justice (DOJ) Antitrust Division and have discussed allegations of anticompetitive practices in the meat packing industry. Should USDA find a violation of the Packers and Stockyards Act, it is authorized to report the violation to DOJ for prosecution,” USDA added.

The North American Meat Institute (NAMI), which posted the report on its website, said, “The report, which identifies no wrong-doing, affirms that two extreme and unforeseen events affected beef markets.”

“In its analysis of the effects of the fire and the pandemic, USDA found no wrong-doing and confirms the disruption in the beef markets was due to devastating and unprecedented events,” said NAMI President and CEO Julie Anna Potts. “It is difficult to see how the USDA’s recommended legislative proposals would have changed the outcome of the fire or the pandemic.

“We will continue discussions with producer groups, Congress, and the administration to ensure there is a fair and competitive market. It is especially critical in these uncertain times for producers and packers to work together.”

NAMI also included links of the report by Dave Juday of The Juday Group and a May analysis of the situation by Stephen Koontz of the Department of Agricultural and Resource Economics at Colorado State University.

Koontz stated, “Record-low livestock prices are also not a surprise. If packers cannot run at typical throughput levels – especially if supplies are abundant – then the marginal value of that last group of animals that is not-sold is close to zero.”

Koontz described COVID-19’s disruption of the beef market this way: “Record-high meat prices are not a surprise. The grocery store supply chain was emptied during the closures of the local economies and then had difficulty catching up. Further, prices associated with specific cuts that consumers typically prepare at home were the highest. Prices of cuts sold at restaurants initially dropped to record lows and then rallied as consumers made substitutions and began purchasing cuts they did not typically buy. However, all rallied as total of beef supplies diminished with closures and partial operations.”

National Cattlemen’s Beef Association Vice President of Government Affairs Ethan Lane said today, “We are pleased that USDA has produced a report into the market dynamics impacting cattle producers across the country. Since NCBA initially requested this investigation, this issue has remained a central topic of conversation for NCBA, our state affiliates, and cattle producers throughout the country. While we are collectively still awaiting the results of the Department of Justice’s ongoing investigation into these issues, the information in this report will be very helpful and timely to the cattle industry’s robust discussion of cattle markets and price discovery during our Summer Business Meeting in Denver next week.”

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, one of the critics of cattle markets, praised the report but said, “It’s a breath of fresh air to see President [Donald] Trump and Secretary Perdue take this issue seriously, when so many others before them ignored it. We must continue to investigate anticompetitive actions by corporate packers who value profits over the economic livelihoods of farmers, ranchers and rural America. In the meantime, the considerations outlined in this report are a good place to start. I will continue to be a voice for independent producers who, for generations, have raised quality meat for the country and world.”

Grassley added, “The cattle market industry is broken. Years of rampant consolidation by meatpackers has led to unfair access for producers and easily-disrupted meat supply for consumers. The ongoing pandemic has only intensified this reality. During my 99-county meetings, Iowans regularly decry these unfair and uncompetitive market realities. Thankfully, the Trump administration has created a roadmap that can return transparency and fairness to the cattle market.

“As USDA continues to investigate market manipulation and unfair practices, today’s report lays out steps we can take to fix this marketplace. Congress has a responsibility to heed the advice of this report and take action to restore cattle price transparency when we reauthorize Livestock Mandatory Price Reporting requirements.”