An Explanation of How Beef Packers have "Allegedly" Colluded, and What Really needs to be Investigated

On Wednesday the President gave the news that many in the cattle industry have been wanting to hear for years. He has asked the Department of Justice to investigate the U.S. beef packers and find out if they have broken anti-trust laws. This is great news for cattle producers who have fought long and hard working to get attention brought to this issue, but I am concerned with how the timing of what is going on right now could impact this investigation.

Along with the attention of the President, the beef packing cartel, is now in the National media spotlight, which means there are now a lot of people reporting on this issue who have no idea what they are talking about. That’s not their fault, the beef market is incredibly complex, but what I have heard, in the media, since the President’s announcement is that this investigation is due to the Corona Virus shutdowns. That is wrong.

The investigation needs to focus on how four beef packers control around 85% of all beef production, and “allegedly” work together to use every excuse they can find, to rip off both the cattle producers and consumers. The problem with blaming this investigation on the current pandemic is, that now that packing plants are shutdown, they actually have a pretty good excuse.

Simple economics would tell you that when consumers are under supplied and suppliers are over supplied the middle mans profit margin is going to increase. This is what we have do to the packing plant shutdowns. Grocery stores are begging for beef and cattle feedyards have too many cattle. The packer is sitting in the middle with his hands raised saying,, “Hey, its not our fault our plants are shut down and we are over supplied and our customers are under supplied. This is how the market works.” Now are they being greedy bastards about it, price gouging, and making sure they squeeze every dime out of both their suppliers and consumers? Yes, and that maybe illegal but its not collusion, and if this investigation is focused on a time when plants are shut down nothing will come of it.

The investigation needs to look into all of the events that lead to the current disaster. It should start at the time the first packing plant shutdown and go backwards through time.

It should look at the first two weeks of the pandemic, when all packing plants were fully operational and shoppers were panic buying. The price of beef skyrocketed and the bottom fell out of the cattle market. Beef packers enjoyed record profits while consumers and cattle producers both fit the bill.

The investigation should look into why all four beef packers have reduced their production and shoved it into this bottleneck. They should look into why, over the past few years has this beef packing cartel shut down 12 beef packing plants, and in some cases blocked their ability to be reopened. Why have they shrunk their own ability two process cattle by nearly 2 million head per year.

The investigation should look back at the past 5 years, and see how beef prices had absolutely no correlation to cattle prices. They should look at how, when beef prices rose due to high demand, cattle prices continued to drop and packer profits increased.

The investigation should look at multiple lawsuits filed against the packers for collusion and market manipulation. It should look at the testimony of a packing plant employee who said that all four packers had an, “agreement” to reduce production when cattle prices got too high. This agreement would drive cattle prices lower and increase all of their margins.

They should investigate how cattle markets are based completely off of a small percentage of cattle sales that are negotiated, and how the packers have given sweetheart deals to the big corporate feedyards in order to keep it that way.

They should look into all that and much more, but my fear is that they won’t. There is no question as to what is causing low cattle prices today, and that is packing plant closures that are easily explained. What needs to be looked into are the factors leading up to today, that there seems to be only one explanation for. Have Tyson, Cargill, JBS, and National have been working together to control the supply of cattle in order to increase their profits?