DES MOINES, Iowa – Iowa Agriculture Secretary Mike Naig has called on the U.S. Department of Justice to expedite its investigation into potential price disparities and anti-competitive practices in the live cattle market, including the disparity between live cattle prices and boxed beef prices.

“There has been no update on the status or findings of this investigation,” he told U.S. Attorney Gen. Merrick Garland in a May 28 letter. “As our cattle producers have awaited the results of your investigation, they have also faced extreme market disruptions, supply chain disruptions, limited price discovery, delayed cattle delivery times and increased feed costs.

“It is imperative that the DOJ wraps up this investigation and releases its findings in a timely manner to provide much-needed transparency for Iowa cattle producers.”

He said a conclusion of this investigation presents an opportunity for the department to provide increased market transparency, while fostering a continued healthy relationship between cattle producers and processors.

“In an effort to protect and promote the long-term viability of independent cattle producers, I respectfully request that the Department of Justice complete this investigation and report its findings as promptly as possible,” he said.

In a May 17 letter to Garland and USDA Secretary Tom Vilsack, Iowa Cattlemen’s Association Richard Godfrey called for concurrent investigations of market manipulation by the packing industry, saying “the current state of the cattle industry is egregious, and must be addressed immediately.” 

Like Naig, Godfrey said, “Since August 2019, the cattle industry has suffered multiple extreme market disruptions, often referred to as ‘black swan events.’ These disruptions are unpredictable, such as the Tyson plant fire in Holcomb, Kan., or the supply chain disruption caused by the COVID-19 pandemic, and are often accompanied by a ripple effect directly or indirectly affecting the cattle industry for an extended period of time.

“Every market disruption comes with a significant price – some more than others,” he said. “The cattle industry is particularly vulnerable due to few buyers in the market. In the current, an oligopsony (a state of the market in which only a small number of buyers exists for a product) of four meatpackers control approximately 85 percent of the processing industry.

“The concentration of processing power between Tyson Foods, JBS, National Beef and Cargill has created a severe bottleneck in the beef supply chain during black swan events, and has also opened the door for market manipulation,” he added.

He said demand for beef has remained high throughout the COVID-19 pandemic. “The value of beef exports reached record highs in March 2021, with 124,808 metric tons of beef equaling $801.9 million purchased outside of the U.S,” he said. “In addition, daily cattle slaughter reports from the USDA Agricultural Marketing Service reflect healthy demand for beef and the ability to process the cattle necessary to fulfill purchase requests.”

As of May 14, he said the choice boxed beef cutout was valued at more than $316/cwt. “At the same time, cattle producers received average bids of approximately $119/cwt.,” he said. “The gross packer margin, on an average steer weighing approximately 1,450 lbs., with a 63 percent dressing percentage, exceeds $1,000/head.

“This alone would not be cause for concern; however, thousands of cattle producers in Iowa and across the nation are struggling to break even,” he added. “Estimated returns for many cattle producers are below zero.”

In concert with the irregular disparity between fed cattle demand and beef product demand, he said fed cattle delivery times have consistently been pushed several weeks following purchase. To further exacerbate the issue, he added most of those cattle were purchased using lucrative formula contracts, with details undisclosed to the public.

“We recently witnessed the impact of captive supply in Iowa, as one of the major packers announced they would not be active in the market for an entire week,” he said. “While cattle producers wait for their purchased cattle to be harvested, they are expected to cover the cost of care, feed and yardage for livestock they no longer own.

“With corn exceeding $7/bu., cattle producers find themselves hemorrhaging thousands of dollars,” he added. “The combination of limited competition, captive supply and formula contracting has not only suppressed live cattle prices, but has also placed an exorbitant financial burden on the shoulders of cattle producers.”

He said U.S. cattle producers work hard to manage inputs, mitigate risk and raise cattle that ultimately provide the high-quality beef that packers, retailers and consumers demand.

“They do their best to align production with seasonal consumer demand patterns to maximize market opportunities,” he said. “Despite all of this, most are unable to better position themselves in the market due to the exploitative actions of the packing industry.”

He said, “Failure to act on this matter leaves the USDA and the DOJ culpable for the countless cattle producers that will inevitably be starved out of the industry by corporate entities. How many more family farmers and ranchers do we need to lose before the Packers and Stockyards Act (of 1921) is enforced?” he asked Garland and Vilsack.

According to the USDA, the purpose of the Packers and Stockyards Act is “to assure fair competition and fair trade practices, to safeguard farmers and ranchers...to protect consumers...and to protect members of the livestock, meat, and poultry industries from unfair, deceptive, unjustly discriminatory and monopolistic practices.”

Godfrey said, “Today, we formally ask the USDA and the DOJ to initiate concurrent investigations examining whether packers violated the Packers and Stockyards Act through price manipulation, collusion, restrictions of competition or other unfair practices.”