Feds investigating packer role in cattle prices
May 3, 2010
by Meat&Poultry staff
LINCOLN, NEB. – An official representing independent beef producers nationwide said the federal government is conducting its first investigation into whether the handful of large meatpackers that slaughter most of the nation's cattle are illegally or unfairly driving down cattle prices, according to The Associated Press.
As the Justice and Agriculture Departments hold a series of antitrust hearings on competition in agriculture, the investigation is under way. The U.S. Department of Agriculture (U.S.D.A.) is expected to release sweeping antitrust rules covering the meat industry this spring.
Ranchers and critics of the meatpacking industry are hopeful the investigation and more aggressive action by a little-known federal agency will force meatpackers to competitively bid for more cattle. They feel this could help put the brakes on a 15-year trend in which several thousand ranchers are forced out of business every year, resulting in the smallest U.S. cow herd in several decades and threatening a way of life that has kept the nation supplied with beef for more than a century, AP relays.
The federal Grain Inspection, Packers and Stockyards Administration (G.I.P.S.A.) has been speaking with the group's members for months and is "clearly asking questions in the context of an investigation," said Bill Bullard, chief executive officer of R-CALF USA.
"They appear to be doing a very comprehensive investigation of the overall behavior of meatpackers in the cattle market," Mr. Bullard said. He believes a main reason for the investigation is to gather information to help craft new rules.
G.I.P.S.A.’s administrator wouldn't say whether the agency was investigating the "Big Four" meatpackers - Tyson Foods, JBS SA, Cargill and National Beef - who together slaughter approximately 80% of U.S. beef.
Administrator J. Dudley Butler said, however, G.I.P.S.A. is being more aggressive in enforcing the Packers and Stockyards Act and investigations are part of that.
In 2008 the nation's largest meatpackers bought about 50% of their cattle on the cash market, G.I.P.S.A. said. Feedlots notify meatpackers cattle are for sale and receive bids for the animals in that market. But in recent years, the largest companies have increasingly avoided that market, buying more cattle through prearranged deals with individual feedlots or ranchers, Mr. Butler said.
With the biggest companies buying fewer cattle on the cash market, prices have dropped, hurting smaller feedlots and ranchers who don't have deals with the large meatpackers, critics charge.
Robert Taylor, a professor of agricultural economics at Auburn University, said cash-market prices have decreased by approximately 5% over the past two decades.
Although the Packers and Stockyards Act is meant to ensure fair competition and protect farmers and ranchers from discriminatory, monopolistic practices by meatpackers, ranchers charge it has long been ignored. A 2006 federal audit concluded G.I.P.S.A. had avoided complex investigations.
That may be changing under the Obama administration, which named Mr. Butler to head the agency a year ago. The agency requested and received court documents from a landmark 2004 case in which a jury awarded 30,000 cattlemen a total of $1.28 billion after concluding that Tyson Foods, the country's largest meatpacker, used unfair marketing agreements to suppress cattle prices. A judge overseeing the trial overturned the decision.