USDA: No Cattle Market Wrong-Doing

Investigations Continue to Determine if Packers and Stockyards Act was Violated After Holcomb Fire, Pandemic

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Cattle producers have seen major events over the past year drive down cash prices for fed cattle, while at the same time pushing up the prices packers received for boxed beef. After months of analysis, USDA stated it cannot find any violations of the Packers and Stockyards Act, but the department has some recommendations such as changes to mandatory price reporting rules. (DTN file photo by Katie Dehlinger)

OMAHA (DTN) -- USDA cannot conclude right now if anyone in the cattle industry violated the Packers and Stockyards Act in the aftermath of two major market disruptions over the past year.

After months of work, USDA released a report Wednesday summarizing volatility in cattle and beef prices following last summer's Tyson fire in Kansas and the loss of packer capacity during the early stages of the COVID-19 pandemic this spring. Both situations led to record spreads between fed cattle prices and record-high boxed beef prices.

USDA officials cannot say if there were violations of the Packers and Stockyards Act, stating in the report that the investigation into potential violations is continuing. An accompanying news release from USDA stated, "The report does not examine potential violations of the Packers and Stockyards Act," but USDA continues to work with Department of Justice officials regarding "allegations of anticompetitive practices in the meatpacking industry."


Agriculture Secretary Sonny Perdue indicated in a statement that work continues to analyze the cattle markets.

"The report examines these economic disruptions and the significant increase in the spread between boxed beef and fed cattle prices that resulted from them," Perdue said. "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."

Others who weighed in on the report stated the Department of Justice is still investigating the packing industry. "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 Zippy Duvall, president of the American Farm Bureau Federation.


The report summarizes the reactions of fed cattle and boxed beef prices following the Aug. 9, 2019, fire at the Tyson Fresh Meats plant in Holcomb, Kansas. The Holcomb plant is responsible for 5% to 6% of daily cattle slaughter and the fire prompted an immediate shutdown that quickly drove down live cattle prices.

The spread between dressed fed cattle prices and the Choice boxed beef cutout value reached a then-record $67.17 per cwt after the Holcomb fire. The record spread later became worse at the height of the COVID-19 pandemic. In the week leading up to the fire, the spread between fed cattle and Choice boxed beef was $36.03 per cwt. In comparison, the average spread from 2016-18 was just under $21 per cwt.

USDA stated it took about three weeks after the Holcomb fire for the spread between fed cattle and boxed beef to come down to $41.77.

Cattle markets last fall reached a boiling point for producers, who created the Twitter hashtag #FairCattleMarkets. The U.S. Senate held a hearing on the situation and as many as 400 cattle producers held a rally in Omaha demanding more fairness in cattle prices and a restructuring of the Packers and Stockyards Division, now under the umbrella of the Agricultural Marketing Service.


Then, this past spring as COVID-19 began hitting the U.S. and the country effectively started to shut down, boxed beef values rose while cattle prices were more volatile. Packers were operating at capacity from March to early April and the price spread between fed cattle and boxed beef grew from $34 per cwt to $66.

The spread between fed cattle and the Choice boxed cut widened even more in April when infections at packing plants caused several to shut down. At the peak, nearly 40% of cattle processing capacity was shut down. Packers saw demand soar as consumers reacted to the potential of possible beef shortages. Yet, the closures of packing plants and high infection rates among packinghouse workers led to fewer cattle purchases, USDA stated. From early April to the second week of May, the spread grew from $66 per cwt to a new record $279 per cwt, a 323% increase.

Packing plant capacity began to normalize after late April when President Donald Trump signed an executive order requiring USDA to ensure packing plants reopen and remain open. The Labor Department and Occupational Safety and Health Administration also issued guidance for packers to provide workers with protective equipment and social distancing.

The Food and Environment Reporting Network has continued to track COVID-19 cases, showing just under 37,000 packing plant workers at 370 plants have been infected by the coronavirus, and 168 meatpacking workers have died from the virus.


Looking at market options for cattle producers, the USDA report highlights the role of the Livestock Mandatory Price Reporting law, which has been in place for 20 years and is up for reauthorization this fall. One of the problems with price discovery right now, USDA states, "is the declining number of participants in the negotiated cash market." This issue has been raised in Congress by Sens. Chuck Grassley, R-Iowa, and Jon Tester, D-Mont., who have introduced legislation that would require individual packers to buy at least 50% of their cattle on the cash market.

Grassley on Wednesday praised the Trump administration for the report and said investigations must continue into anticompetitive practices by packers.

"The cattle market industry is broken. Years of rampant consolidation by meatpackers has led to unfair access for producers and easily disrupted meat supply for consumers. The ongoing pandemic has only intensified this reality," Grassley said. He added the report offers a "roadmap that can return transparency and fairness to the cattle market."

Sen. John Thune, R-S.D., said cattle producers in his state continue to face extreme volatility in the market, "and I remain concerned about potential anticompetitive activity in the highly concentrated meatpacking industry." Thune added he will "continue to press the Department of Justice to conclude its investigation into potential price manipulation and other anticompetitive activities in the meatpacking industry."


The North American Meat Institute (NAMI) issued a news release emphasizing that USDA "identifies no wrong-doing" by its members in "two extreme and unforeseen events" that hit the beef markets.

"In its analysis of the effects of the fire and the pandemic, USDA found no wrong-doing and confirms the disruption in the beef markets was due to devastating and unprecedented events," said Julie Anna Potts, NAMI's president and CEO. "It is difficult to see how the USDA's recommended legislative proposals would have changed the outcome of the fire or the pandemic."

NAMI's news release included supporting analysis from economists explaining why it was economically justifiable for the packers to take advantage of market conditions by buying cattle at low prices and selling meat at high prices.

Ethan Lane, vice president of government affairs for the National Cattlemen's Beef Association, noted NCBA had initially requested the USDA investigation. The report will provide fodder for industry discussions at NCBA's summer meeting next week, Lane said, adding NCBA members "are collectively still awaiting the result of the Department of Justice's ongoing investigation into these issues."

USDA's report also offered other industry recommendations. For instance, USDA states small- and medium-sized cattle producers "could better position themselves to more effectively negotiate sales with packers" if they had better access to risk management training. Cattle feeders that hedged before the pandemic were able to better mitigate the steep decline in live cattle by closing their hedge -- buying a futures contract at a lower price -- to make a profit.

USDA also noted that the department is reviewing 2,351 comments on a proposed USDA rule that would establish criteria for the agriculture secretary to determine whether an undue or unreasonable preference has occurred in livestock markets that violates the Packers and Stockyards Act.

A full copy of the USDA report can be found at…

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Chris Clayton