23 July 2020

3 minute read

North America

As part of its commitment to ensuring fair and competitive markets for the livestock, meat and poultry industries, today the US Department of Agriculture (USDA) released a Boxed Beef and Fed Cattle Price Spread Investigation Report on its ongoing boxed beef and fed cattle price spread investigation.

“The closure of the Tyson beef packing plant in Holcomb, Kansas, 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 US 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, we assure producers that our work continues in order to determine if there are any violations of the Packers and Stockyards Act. If any unfair practices are detected, we will take quick enforcement action.”

Background

The Boxed Beef and Fed Cattle Price Spread Investigation Report, prepared by USDA’s Agricultural Marketing Service in coordination with the Office of the Chief Economist, summarises 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.

The report also 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 to reduce instances of non-reporting 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 and Stockyards Act investigative and enforcement tools.

While the report does not examine potential violations of the Packers and 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 meat packing industry. Should USDA find a violation of the Packers and Stockyards Act, it is authorised to report the violation to DOJ for prosecution.

NFU response

The National Farmers Union noted that since the work is ongoing, “AMS has limited ability to publicly report the full scope and status of the investigation." As such, the report neither exonerates beef packers nor reveals violations of the Packers and Stockyards Act. However, it does provide policy recommendations for strengthening competition and transparency in the industry.

As a vocal proponent of open and competitive markets, NFU welcomes USDA’s inquiry into these two events. However, as farmers endure unfair and abusive conditions, the report must be accompanied by real and meaningful reforms, as NFU President Rob Larew affirmed in a statement:

“Price fixing in the meat industry is not a new phenomenon; a century ago, Farmers Union members were contending with similarly high levels of concentration among meatpackers and the anticompetitive practices that kind of market power enables. Recognising the immense danger of unchecked corporate consolidation, Congress and the White House worked together to restore competition and shield farmers and ranchers from abusive treatment.

“We appreciate USDA’s efforts to examine this issue and present potential solutions, but it is clear that this is just the beginning; now, like 100 years ago, radical and immediate action is needed to create a fair and balanced food system. The agency must thoroughly conduct its ongoing investigation, for which we intend to hold them to account. Additionally, we urge legislators, USDA, and other federal agencies to strengthen protections for farmers, enforce existing antitrust regulations, and prevent undue market power in the future.”