Cattle associations urge DOJ probe as coronavirus pandemic price concerns continue

Dive Brief:

  • Cattle associations in 23 states sent a letter last week urging U.S. Attorney General William Barr and the U.S. Department of Justice to launch an investigation into possible anti-competitive actions in the meat industry.
  • Earlier this month, the USDA announced and investigation into why the rise in beef prices due to pandemic hoarding did not convert into higher cattle profits for farmers. Agriculture Secretary Sonny Perdue said the agency would add pandemic pricing into the ongoing investigation of cattle futures and prices opened after a fire at a Tyson Foods beef plant in Kansas last year.
  • The letter acknowledged the USDA’s inquiry, but said the DOJ “would be the appropriate agency to open an investigation” and wants stricter timelines. “Vital to our producers’ continuity of business is the evidence of any fraudulent business practices within the meatpacking industry be identified quickly and rectified immediately,” the letter said.​

Dive Insight:

Since outbreak fears began to spread across the U.S. in March, meat sales have been rising, but that didn’t boost profits for producers. Despite wholesale prices for processed beef jumping almost 20%, the price paid to ranchers has dropped 11% since January, Fern’s Ag Insider reported. The letter from the cattle associations said this issue is of “vital importance to the future of one of the largest sectors of U.S. agriculture.”

When the USDA announced it would expand its investigation into the cattle industry with these latest coronavirus price concerns, many seemed pleased that it would be looked into. However, the cattle associations wrote their industry is looking for clarity for the future, and wants the DOJ to quickly investigate to help provide it. 

After last year’s fire at the Tyson Foods beef processing plant in Holcomb, Kansas, cattle prices plummeted because the event temporarily eliminated a big buyer of livestock. The USDA initially opened its probe into the market after the fire because farmers expressed concern that meat packers such as Tyson, Cargill and JBS would take advantage of the situation by dropping their offering prices.

“Both events continue the undue financial burden for all cattle producers within the production side of the beef cattle industry and in turn affect rural America short-term and long-term,” the letter sent last week said.

Since the department was already investigating the market, Perdue decided to tack on these latest COVID-19 concerns. He said that if any unfair practices are detected, the department “will take quick enforcement action,” Reuters reported. U.S. Sen. Deb Fischer of Nebraska said on Twitter that ​the USDA’s investigation was “a good decision to address potentially unfair practices.” 

The Department of Justice has gotten involved in price issues in the meat industry before. There is congressional support for this investigation, with several senators writing a letter urging the department to investigate allegations of price fixing in the cattle market. 

The investigation from USDA and a potential one from DOJ puts pressure and scrutiny on the small group of the meat companies that dominate the market. Tyson, Cargill, JBS and National Beef Packing Company buy and process more than 80% of fed cattle in the U.S. Currently, these big meat producers are struggling to keep up with demand as workers in their processing plants are getting sick from coronavirus.

These producers have faced similar accusations before. Last year, The Ranchers Cattlemen Action Legal Fund United Stockgrowers of America and other cattle ranchers filed a class action lawsuit accusing the companies of a conspiracy to minimize prices paid to ranchers for cattle in order to inflate their own margins and profits. 

But it’s not just cattle. The coronavirus outbreak has affected prices and supply in several categories across the food industry. Wholesale egg prices more than tripled last month as consumers cleaned out grocery store shelves.

Although it can be difficult to prove price-fixing claims, the DOJ already warned businesses that it will hold them accountable if they violate antitrust laws during the coronavirus outbreak, so these markets could face investigations in the near future. 

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