Costly mistakes: USDA finds that JBS USA did not keep track of carcasses in plants, some feeders say it’s a chronic problem
GIPSA and the Farmer Fair Practices Act
Because the Grain Inspection, Packers and Stockyards Administration – previously a standalone agency of the U.S. Department of Agriculture - was recently moved under the Ag Marketing Service, the entity now answers to a director who is focused on marketing, not investigating.
According to R-CALF’s Bill Bullard, AMS is capable of inflicting fines and issuing cease and desist orders, but cannot recover damages for producers harmed in cases such as this. “GIPSA being buried within the AMS means it doesn’t report directly to the Secretary of Agriculture. It’s a mismatch to have a regulatory agency subservient to a marketing agency.”
If the Farmer Fair Practices Act, a proposed update to the Packers and Stockyards Act, had been enacted by USDA, it would have given individual producers who were harmed by illegal practices of packers the ability to file complaints and seek reimbursement for damages, if a GIPSA investigation found that the producer had been harmed.
USDA’s Ag Marketing Service reported last week that it had reached an agreement with JBS USA Food Company, regarding alleged violations of the Packers and Stockyards Act.
The government news release said that an AMS investigation of JBS, also known as Swift Beef Company, Greeley, Colorado, revealed problems regarding payment accuracy based on carcass weights and tracking at its Grand Island, Nebraska, plant.
“AMS conducted an investigation that revealed JBS Swift failed to maintain the identity of beef carcasses purchased on a hot weight basis to ensure accurate payment to livestock sellers at its Grand Island, Neb., facility. During the period of Dec. 14, 2017 through March 31, 2018, JBS Swift failed to record accurately the weights, grades and prices of carcasses on accountings issued to sellers,” said the news release.
The consent decision ordered JBS Swift to pay a $50,000 civil penalty, and to cease and desist from:
• Failing to properly maintain the identity of each seller’s livestock and the carcasses therefrom;
• Failing, after determination of the amount of the purchase price, to transmit or deliver to the seller or his duly authorized agent a true written account of such purchase showing the number, weight and price of the carcasses of each grade (identifying the grade) and of the ungraded carcasses, an explanation of any condemnations and any other information affecting final accounting; and
• Failing to maintain sufficient records to substantiate the settlement of each transaction.
JBS made adjustments to its carcass tracking procedures and computer software upon realization of the violation, said the news release.
Cameron Bruett, a JBS media spokesman explained the problem. “We experienced an error in our carcass sequencing processes following a software change in early December 2017. As a result, we mistakenly overpaid some livestock sellers and underpaid others during a three-month period. Following a self-audit, we corrected the issues that led to the errors and entered into an agreement with USDA where we would not seek reimbursement from any overpaid livestock sellers and make refund payments to underpaid livestock sellers during the three-month period.”
AMS spokesman I.J. Perez said the payments JBS issued were not necessarily for the amount the company owed the producer. “Because JBS was not properly maintaining the identity of carcasses through the entire production process, the records did not provide the seller with a true written account of the sale. As a result, payments were not for the correct amounts.”
In July of 2018, AMS reported that JBS had been found to be in violation of the Packers and Stockyards Act for failure to maintain and operate its dynamic monorail scales to ensure accurate weights at its Cactus, Texas facility on Aug. 9, 2016, and Greeley, Colorado, facility on Dec. 1, 2016.
At that time, the company paid a civil penalty of $29,000 and consented to maintain correct and accurate scales that record weights on scale tickets, internal records, kill sheets or other accounting issued to sellers of livestock.
Often smaller feeders are unable to obtain a live weight bid, which forces them to sell them on a carcass basis, said Nebraska feeder, Steve Krajicek of Lincoln. Because he doesn’t see the cattle after they enter the processing facility, he believes there is more opportunity for a processor to take advantage of a feeder when buying cattle based on carcass weight rather than live weight. The cattle seller does not see the cattle after they go to holding pens, so Krajicek does not know how long his cattle wait to be slaughtered, or how the carcasses are tracked and weighed within the plant.
The former feed salesman said he filed a complaint with the GIPSA about a year ago regarding truck unloading problems and poor yields, issues that are inter-related. “On many, many occasions we had problems where our trucks would wait to be unloaded at the Grand Island plant.” Because he was familiar with the way his cattle yielded at other plants, Krajicek knew there was a problem when they consistently yielded lower at JBS plants, according to JBS paperwork.
Krajicek said he and the processor would agree to a time for delivery of his cattle, but JBS wouldn’t unload his cattle sometimes for several hours after they arrived at the plant. “Say you are supposed to have three loads there at 3 pm on a Thursday, we’d get them there and they’d say we can’t unload you. The cattle sit on the truck for several hours, you can imagine what happens, they shrink more, there are injuries, all of that is absorbed by the producer.”
“I told them, ‘we have scales, we can weigh them when they leave the feedlot,’ so we know what acceptable yields are and acceptable shrinks are. After they learned that we weighed every load at the feedyard when they left, they weren’t as interested in buying my cattle,” he said.
The feedyard that handles his cattle did receive a check for three lots of cattle that were sold during the time period in question, but none of the cattle were his.
Krajicek believes JBS shows a bias in favor of larger feedyards, who can most times get a live weight bid from JBS, he said. “When you are forced to sell cattle in the carcass, which many smaller producers are, it’s your trucking expense to get the cattle to a packer,” he said, adding that the feeder stands the shrink and any injuries until the animals are hanging.
Steve Scholz, owner of Lincoln County Feedyard, Stapleton, Nebraska, said he sells cattle to JBS on occasion, and he did receive two different checks from the company totaling less than $50, recently for some animals processed during the time period in question.
He questions how the company determined the value of the payment to rectify the situation, nearly a year later.
Yet another Nebraska feeder, Craig Uden with Darr Feedlot of Cozad, said accurate weights are crucial to a fair trade.
“We sell a lot of cattle on a dress basis, so we rely on accurate weights. There have been times when there might have been a hiccup, and we’ve been notified that there was a small issue or something, but it’s always taken care of.” Uden, who did not sell any cattle to JBS during the time period in question, said he has talked to ranchers or salebarns or others when the weight doesn’t seem right – perhaps the shrink is more than expected. “If we get a larger shrink than we expect, we might have to go back and say ‘what was the deal here?’”
Scholz said he wouldn’t necessarily “point a finger” at the Grand Island facility when it comes to questionable practices of packers. “It’s an old facility. When you are trying to maximize production, and something comes unraveled – like bad weather – it has a chain effect.”
While has also been unable to get a live bid for his cattle lately, Scholz said he continues to keep open the few options he has, for selling finished cattle.
“We do a lot of retained ownership, grid based cattle. We try to maximize that for the customer,” he said.
There are inherent differences between every processor as to how cattle are handled once they are in the plant, which greatly affects yield back to the customer, he said.
Scholz said that perhaps the beef industry should consider requiring live monitors at beef plants, to help ensure trimming practices are more standardized. Yields can be hugely affected by the trimming process. “Maybe these bigger cattle groups want to use their checkoff dollars to get a meat scientist inside these plants to keep an eye on how the carcasses are trimmed.”
More packing plants would be helpful in the overall scheme of things, too, Scholz said. “We will probably never see another big packing plant get built in this country, but I think the industry is moving more in the direction of niche markets, and we need more of these smaller, 200-300 head plants.”
Since 2000, JBS and its subsidiary meat companies have been fined over $28 million for various illegal activities.
“What I’m saying is, how can you trust them?” asked Krajicek. “This has happened not once but three times. They’ve been caught with their scales not right. They were fined for losing track of carcasses. My point is, someone else needs to be running those scales other than the packers.”
“While this technical error was unfortunate, we are confident that we have taken the appropriate steps to correct the issue and provide an equitable solution to affected livestock sellers. Less than 40 producers were negatively impacted and many have already been reimbursed,” said Bruett, on behalf of JBS.