(Washington, D.C., July 22, 2020) – As part of its commitment to ensuring fair and competitive markets for the livestock, meat and poultry industries, today the U.S. Department of Agriculture (USDA) released a 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 U.S. 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.”
The report, prepared by USDA’s Agricultural Marketing Service in coordination with the Office of the Chief Economist, summarizes 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 authorized to report the violation to DOJ for prosecution.
North American Meat Institute
Issues Statement on USDA Investigation into Beef Markets Following Extreme Events
WASHINGTON, DC – The North American Meat Institute (Meat Institute) today released the following statement about a USDA investigation into beef price margins. The report, which identifies no wrong-doing, affirms that two extreme and unforeseen events affected beef markets. The first event was an August 2019 fire at Tyson Foods’ Holcomb, Kansas, beef plant, and the second is the COVID-19 pandemic.
“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 Meat Institute President and CEO, Julie Anna Potts. “It is difficult to see how the USDA’s recommended legislative proposals would have changed the outcome of the fire or the pandemic.
“We will continue discussions with producer groups, Congress, and the Administration to ensure there is a fair and competitive market. It is especially critical in these uncertain times for producers and packers to work together.”
In August 2019, USDA announced its intent to investigate the economic impact caused by the loss of processing capacity after the fire at the Holcomb, Kansas, slaughter facility. In April of this year, USDA expanded the scope of that investigation to include the impact the COVID-19 pandemic has had on industry-wide plant slowdowns. In both instances, the temporary loss of processing capacity interrupted the demand for cattle, causing cash market fed cattle prices to fall and reducing the supply of beef causing wholesale beef prices to rise. Although weekly cattle slaughter and beef production has recovered to near normal levels for this time of year, after dropping by more than a third in in late April, the large number of unharvested cattle and continued consumer demand for beef remain factors in the market.
Agriculture analyst Dave Juday, of The Juday Group, has released an analysis of the USDA Report and its statutory recommendations.
As Dr. Stephen Koontz of the Department of Agricultural and Resource Economics at Colorado State stated “Record low livestock prices are also not a surprise. If packers cannot run at typical throughput levels – especially if supplies are abundant –then the marginal value of that last group of animals that is not-sold is close to zero.”
Koontz described COVID-19’s disruption of the beef market this way, “Record high meat prices are not a surprise. The grocery store supply chain was emptied during the closures of the local economies and then had difficulty catching up. Further, prices associated with specific cuts that consumers typically prepare at home were the highest. Prices of cuts sold at restaurants initially dropped to record lows and then rallied as consumers made substitutions and began purchasing cuts they did not typically buy. However, all rallied as total of beef supplies diminished with closures and partial operations.”
The North American Meat Institute is the leading voice for the meat and poultry industry. The Meat Institute’s members process the vast majority of U.S. beef, pork, lamb, and poultry, as well as manufacture the equipment and ingredients needed to produce the safest and highest quality meat and poultry products.
NCBA Responds to USDA Report on Cattle Markets
WASHINGTON (July 22, 2020) – National Cattlemen’s Beef Association Vice President, Government Affairs, Ethan Lane released the following statement today in response to the release of the results of the USDA’s investigation into cattle markets:
“We are pleased that USDA has produced a report into the market dynamics impacting cattle producers across the country. Since NCBA initially requested this investigation, this issue has remained a central topic of conversation for NCBA, our state affiliates and cattle producers throughout the country. While we are collectively still awaiting the results of the Department of Justice’s ongoing investigation into these issues, the information in this report will be very helpful and timely to the cattle industry’s robust discussion of cattle markets and price discovery during our summer business meeting in Denver next week.”