DOJ subpoenas Big Four meat packers
The U.S. Department of Justice has reportedly contacted the four big meatpackers, seeking information related to an investigation into possible anti-trust violations.
According to a Bloomberg news story, an unnamed source reported that the DOJ sent “civil investigative demands,” which are essentially subpoenas, to the four companies, and is in communication with state attorneys general.
Attorneys general from North Dakota, Nebraska, Iowa, Minnesota, Montana, Wyoming, Colorado, Missouri, Idaho, Arizona and South Dakota asked U.S. Attorney General William Barr to look into the pricing activity of the four big meatpackers in recent months to determine whether or not anti-trust activity occurred. The three major cattle organizations, R-CALF USA, U.S. Cattlemen’s Association and the National Cattlemen’s Beef Association, also requested DOJ scrutiny.
Tyson Foods, JBS SA, Cargill and National Beef/Marfrig are known to control more than 80 percent of the beef processing in this country.
For years before the COVID-19 crisis, cattlemen’s groups were calling for a breakup of the packers, and for rules that would limit their control over the price of live cattle.
During the COVID-19 crisis, the influence of the big four packers over cattle prices has become more obvious, say some cattlemen’s groups. Many packing plants have closed, fully or in part, mostly due to sick workers, leaving cattle feeders no options for their slaughter-ready cattle. Boxed beef prices have more than doubled in recent months, while live cattle prices dropped by 20 percent or more, and many feeders were unable to obtain bids, forcing them to feed cattle past their optimum point — lessening the value of the cattle and increasing the feeders’ costs.
USDA reportedly launched an investigation into packer buying practices after a fire in a large Kansas meatpacking plant in August of 2019 resulted in a significant cattle price drop.
No results from that investigation have been made public.
Hermosa, S.D., rancher Rick Fox is cautiously optimistic that the DOJ will turn up something worthwhile in their investigation.
“We get our hopes up so many times. I really hope something happens this time,” he said. Fox said ranchers and feeders may be losing their trust in government agencies after the investigation into the Holcomb, Kan., Tyson plant fire that happened about 10 months ago, has still not resulted in any public information being released.
“They’ve had plenty of time to investigate that,” he said.
The anti-trust activity among the four big packers is “blatant,” Fox said. “When you get an industry this big, down to four people, it’s pretty easy to have coffee shop talk. It would be no different if me and three others owned all the cows in the country.”
MARKET INFLUENCE
The packers need to be broken up so as to limit their influence over the market, he said.
While some would argue that smaller, independently owned packers would be less efficient, Fox argues that there is a breaking point for efficiency, and he says the smaller local custom plants are busier than ever, but are carrying on their business with integrity. “I’ve called around everywhere to get beef in. They are swamped, but I doubt they have doubled their prices.”
He also pointed out the quality sacrifice that could be made in exchange for efficiency. Much of the beef coming out of the big packing houses isn’t aged, he said, which results in less tender and flavorful beef, even when the animal is a high quality, corn-fed bovine. He said friends from his local town comment on how much better his homegrown beef is compared to the beef available in the grocery store.
Allen Bishop, another Hermosa rancher, experienced first hand the affect of the cattle price drop during the COVID-19 pandemic.
He had planned to sell yearlings in March or April and in early February, the signs were showing an upward trending market. “Demand was up, things were looking good,” he said. Then as the pandemic hit the U.S., cattle prices dropped. He held on much longer than planned, hoping the market would get better, but by May 12, he was forced to sell.
“When I was looking at them in January, I was hoping to get about $1,200 per head. I sold them in May for just over $1,000,” he said.
Other cattle he had raised were being fed in the Platte, S.D., area for slaughter. He was unable to secure a bid when the cattle were at an optimum weight of 1,500 pounds, and five weeks later, with the cattle gaining 3 pounds per day, when a bid of 89 cents per pound was offered — about 30 cents less than what market analysts had originally predicted for that time period, he took the offer.
“We ended up taking discounts because about 15 percent were over 1,650 pounds,” he said.
He had hoped to market into a quality-based program like Certified Angus Beef, but the market challenges that forced him to overfeed his cattle, precluded him from any such premium.
Bishop also sells beef locally to friends and neighbors, taking his cattle to Black Hills Meat in Hot Springs for processing. He said the state inspection program has been particularly helpful in trying to help ensure customers can get the beef they want.
While the industry waits to hear more about the DOJ investigation, the R-CALF USA lawsuit alleging packer anti-trust behavior will have a hearing on Monday, June 8, 2020. The purpose of the hearing is for the judge to meet with both the defendants and the plaintiffs to determine whether or not to grant the packers their “motion to dismiss.”
R-CALF CEO Bill Bullard said they don’t know whether the judge will make a ruling on Monday or if it will take more time.
“We welcome this additional scrutiny by the department of justice and while that is going on, we will continue to prosecute our case through our attorneys,” Bullard said.
The Justice Department subpoenas to the meatpackers follow criminal charges Wednesday against four current and former executives of chicken processing companies, including the chief executive of Pilgrim’s Pride Corp., America’s second-biggest chicken producer, Bloomberg reported. Prosecutors say the executives conspired with one another to fix prices for chicken sold to grocery stores and fast-food chains.
None of the four meatpackers responded to requests for interviews. ❖
— Stadheim is editor of the Tri-State Livestock News, a sister publication of The Fence Post
