Markets Under Investigation

USDA provides update on investigation following 2019 Tyson beef plant closure and COVID-19 pandemic.

As part of its commitment to ensuring fair and competitive markets for the livestock, meat and poultry industries, the USDA released a report July 22 on its ongoing boxed-beef and fed-cattle price spread investigation.

“The closure of the Tyson beef packing plant in Holcomb, Kan., after a fire at the facility, and the COVID-19 pandemic clearly disrupted the markets and processing systems responsible for the production and sale of U.S. beef,” said U.S. Secretary of Agriculture Sonny Perdue. “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,” he continued, “we assure producers that our work continues in order to determine if there are any violations of the Packers & Stockyards Act. If any unfair practices are detected, we will take quick enforcement action.”

Background
The report, prepared by USDA’s Agricultural Marketing Service (AMS) in coordination with the Office of the Chief Economist, summarizes market conditions, fed-cattle prices, boxed-beef values, and the spread before and after the fire and plant closure at the Tyson Holcomb plant, and before and during the COVID-19 pandemic.

Available at https://bit.ly/USDAinvestigate, the report discusses several policy considerations in light of the desire by many market participants for improved price discovery, reinvigorated competition, and a more transparent relationship between the prices for live cattle and the resulting products.

Considerations include potential updates to Livestock Mandatory Reporting (LMR) to reduce instances of nonreporting and increase percentages of negotiated cash transactions, risk management outreach, education and product improvements for small and medium-sized producers, small to very small meat processor outreach and opportunities, and enhancements to the Packers & Stockyards Act investigative and enforcement tools.

While the report does not examine potential violations of the Packers & 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 meatpacking industry. Should USDA find a violation of the Packers & Stockyards Act, it is authorized to report the violation to DOJ for prosecution.

Industry response
“We appreciate the USDA’s thorough examination of the beef markets. There’s little doubt that something is wrong when consumers are paying higher prices for meat and, at the same time, America’s farmers and ranchers are being paid less,” said American Farm Bureau Federation President Zippy Duvall in a prepared statement.

Though pleased USDA responded to calls for an investigation, scrutiny of the markets is not concluded, Duvall pointed out. “USDA indicates their examination continues and investigations by the Commodity Futures Trading Commission, as well as the Department of Justice, are ongoing.”

“We are pleased that USDA has produced a report into the market dynamics impacting cattle producers across the country,” said Ethan Lane, National Cattlemen’s Beef Association (NCBA) vice president of government affairs. “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.”

Lane said that though the industry awaits results of the DOJ investigation, information in the report would be very helpful and timely to discussions of cattle markets and price discovery during NCBA’s Summer Business Meeting in Denver in late July.

“The top-line considerations detailed in this report provide a roadmap for returning transparency and true price discovery in the cattle marketplace,” said United States Cattlemen’s Association (USCA) President Brooke Miller. “USCA has long since advocated for making these changes through the reauthorization of Livestock Mandatory Reporting, a program which is due to expire on September 30, 2020.

“On July 1, USCA and 12 other organizations sent a letter to Senate Agriculture Committee Chairman Pat Roberts requesting a hearing be held on the state of the U.S. cattle industry,” he continued. “It is simply unacceptable to be met with silence, while producers are asked to weather another year of declining farm and ranch income. Producer organizations have brought forth real, tangible marketplace solutions that are underscored in this report and that deserve to be brought forward for discussion on Capitol Hill.”

Editor’s note: This article was compiled from news releases provided by the AFBF, USDA, NCBA and USCA. Original photo for illustration by Kasey Brown.