Cattle Groups Petition Attorney General For Market Inquiry

Various news organizations reported that about 23 state cattle organizations sent letters to US Attorney General William Barr Monday requesting a formal investigation seeing evidence of fraudulent business practices within the beef packing industry.

The letters come in the midst of packing plant closures linked to rapid transmission of the Covid-19 coronavirus among plant employees and on the heels of a fire at Tyson’s Finney County beef plant in August.  The extreme market volatility and pricing imbalances have put many cattle producers on the financial ropes, and cattle producers want to know why.

They complained about the sudden beef and cattle market effects that sent profits to the beef packers and away from the cattle producers.




The two events show how vulnerable cattle producers are to such sudden changes in the well-oiled machine that is the cattle and beef industry, a market analyst said.  It takes around two years for a calf to go from conception to the packing plant with seasonal variations for when in the year the calf was born.

That makes it impossible for producers and feeders to respond to extreme market volatility, the analyst said.  In a sense, cattle producers are the ultimate in price takers; they are not price makers.

If cattle do not sell, they can’t be warehoused until market conditions improve, and prices tank when there are disruptions in the beef market.




The market analyst said the beef and cattle markets are two distinct markets that are only related, not joined at the hip, and the packer is the middleman.  As such, the packer often is fingered as the culprit when things go wrong on either end.

Beef markets respond to their own market cues, the analyst said.

They go up when supply declines or markets open up to new buying, the analyst said.  Prices also decline when meat supplies are high or when buying interest declines.

Beef packers, as publicly traded companies, must respond to beef market cues when there are disruptions in supply or demand, the analyst said.  They are responding to the same market cues, so reactions will be similar.

Taking the Tyson fire in August, for example, the analyst said packers responded to the disruption in supply chain dynamics by raising beef prices, as the market is supposed to work.  (Economists will say the higher prices are there to regulate supplies and who gets the available supply.)

The lower bids for fed cattle in the immediate aftermath of the fire were because of fears the available fed cattle couldn’t be processed by the suddenly reduced slaughter capacity.  Packers also responded by putting on extra shifts at other plants, so cattle prices were supported in the end.

The producer-group letter Monday invoked the specter of collusion among packers to lower cattle prices, but the analyst said the mandatory price reporting to the USDA, there is no need.  Just read USDA.




Cash cattle trade was reported in the Plains last week at $105 per cwt on a live basis, steady with the previous week, and at $150 to $168 dressed, steady to down $18.

The USDA choice cutout Monday was up $9.39 per cwt at $248.38, while select was up $10.79 at $227.99.  The choice/select spread narrowed to $10.39 from $11.79 with 80 loads of fabricated product sold into the spot market.

There were no deliveries against the Apr futures contract tendered on Monday.

The CME Feeder Cattle index for the seven days ended Friday was $117.88 per cwt, up $2.07.  This compares with Monday’s Apr contract settlement of $118.32, down $1.20.