AGs urge look at cattle industry
Several states tell Justice Department of antitrust concerns
Several attorneys general are urging the U.S. Department of Justice to investigate the cattle industry over antitrust concerns.
Competition issues stemming from a highly concentrated market have existed for years. Only a few beef packers control the nation’s supply, raising concerns of price gouging and other unfair market practices. U.S. investigators are looking into the matter, some with renewed interest as ranchers face steep losses during the coronavirus pandemic.
The disparity between the prices of live cattle and retail beef is “a sign of a market that lacks full and fair competition,” attorneys general from major beef-producing states said in a letter Tuesday to the Justice Department.
Cattle future prices fell nearly 30% from January to April as beef prices on store shelves increased. The U.S. Department of Agriculture began investigating the cattle markets over antitrust activity after a fire that destroyed a Tyson Foods beef plant in Kansas last year. The investigation was expanded to include a look at the recent price divergence, U.S. Agriculture Secretary Sonny Perdue said in a tweet last month.
With four packers controlling 80% of the nation’s beef supply, the attorneys general said, the market may be susceptible to manipulation, especially during times of food insecurity. Tyson Foods, based in Springdale, is the country’s top beef producer.
“We have concerns that beef processors are well positioned to coordinate their behavior and create a bottleneck in the cattle industry —
to the detriment of ranchers and consumers alike,” they said in the letter. If there is no enforcement action taken after an investigation, they requested that U.S. Attorney General William Barr consider strategies that promote market competition and protect consumers. Attorneys general from Colorado, Iowa, Missouri, Nebraska, North Dakota and other beef-producing states signed the letter.
At the start of the year, conditions looked rosy for farmers and ranchers. African swine fever had decimated China’s hog supply, and producers were anticipating strong export demand to generate profits. But the coronavirus took hold, closing or slowing restaurants and businesses and rattling America’s food producers.
“Cattle producers have been calling for industry reforms as they feel that packers have benefited at the cattle producers’ expense,” analyst Ben Bienvenu, who covers food and agribusiness for Stephens Inc., said in a research brief. For instance, last week’s beef cutout values — the estimated value of a beef carcass — were up nearly 24% as livecattle prices fell about 5%.
Members of Congress, including Rep. Rick Crawford, RArk., have urged the Agriculture Department to release its cattle market investigation findings as soon as possible. They said Friday in a letter to Perdue that recent market activity has had a “devastating effect” on their constituents and casts a shadow over the whole system.
“When market participants begin to believe that markets are not competitive or transparent that suspicion has a dangerous industry-wide ripple effect,” they wrote in the letter.
R-CALF USA, a rancher advocacy group, last week called on President Donald Trump to conduct a review of the beef supply chain and look into whether a restructuring is needed.
Cattle futures on Wednesday rose 3 cents on the Chicago Mercantile after major meatpacking plants began reopening. An executive order was signed last week requiring meatpacking plants, deemed “critical infrastructure,” to remain open during the pandemic. Meanwhile, at least 4,000 plant workers have been sickened and some 20 meat facilities have closed at some point in the past two months. Tyson is reopening two locations with limited capacity this week, including its largest pork plant in Waterloo, Iowa.
Tyson’s profits declined 15% from a year before, in part because of production issues in the quarter that ended in March. Despite ample cattle supply, Tyson President Dean Banks said in a conference call Monday that temporary plant closures have increased the company’s operating costs and reduced overall profitability. Tyson is expecting effects from the virus to continue through September.