Why Did Tyson Foods Offer to Pay More for Cattle They had Already Purchased?

By Jim Mundorf

The third week of March was our first full week of global pandemic. The demand for beef was through the roof, but for some reason the price for cattle stayed in the gutter. On Friday March 20, after the markets had closed on another piss poor week in the cattle market, word started to spread that Tyson Foods cattle buyers were calling up cattlemen that they had already bought cattle from. They told them that they were going to give them $5 more per hundred weight for the cattle they had already bought. This had all of cow country scratching their heads, why?

Click on image to listen to full statement.

It just so happens earlier in the day on March 20th, South Dakota Senator Mike Rounds posted a statement on his Twitter account that he had made the day before. In that statement Rounds says, “Today Senators Kevin Cramer, John Hoeven, Steve Daines and I have sent a letter to the Department of Justice urging the agency to investigate continued allegations of price fixing within the cattle market.” Just to be clear on the timeline, on March 19 four U.S. Senators ask the Department of Justice to investigate, “price fixing within the Cattle Market,” and the next day Tyson waits for the market to close and decides out of the goodness of their hearts they are going to give an added $5 to the price for the customers that they had previously ripped off.

What Tyson’s Gary Michelson said in Drovers Magazine about the price add is, “This is an unprecedented time and the intent of our response is to show our support in an effort to help our supply partners weather this extraordinary situation.” What an incredibly sweet and kind gesture that I am sure has nothing to do with any sort of investigation.

According Drovers during the week of March 20, cattle feeders lost an average of $89 per head of cattle that they sold. If they were lucky enough to sell to Tyson with their $5 “show of support,” they would have only lost around $21.50 per head. On the other side beef packer margins were reported to be at a whooping record of $504.43 per head, up from $175 the week before. One year ago packer margin was $133.

The added $5 is a mind boggling move. If anything it should increase the calls for investigations not lessen them. Adding $5 to a price that was based on the open market seems pretty manipulating. If they wanted to, “show their support,” why not just bid more for the cattle, which would bring up the entire market? Why wait until Friday after close to make those calls? The whole thing stinks to me. I think those cattle feeders that got that $5 should maybe be thanking some strong arms in D.C. instead of Tyson Foods, but, full disclosure, I am not a fan of that company.