In this file:
· Cattle groups laud Perdue’s call to investigate prices
· Perdue’s probe raises temperature in beef industry
· USDA Investigation Into Packing Plant Margins After Tyson Fire Could Take Awhile
Cattle groups laud Perdue’s call to investigate prices
By Dave Bergmeier and Kylene Scott, High Plains Journal
Sep 4, 2019
National and state affiliates of various cattle organizations are unified in their support of U.S. Secretary of Agriculture’s Sonny Perdue call on Aug. 28 to have the USDA’s Packers and Stockyards Division to investigate recent beef pricing margins to determine if there was any unfair trade practices that occurred.
In particular, Perdue said the division would see if there was any evidence of price manipulation, collusion, restrictions or competition or other unfair prices.
The particular focus was on how prices reacted shortly after a fire on Aug. 9 shut down the Tyson Foods plant in Holcomb, Kansas, which killed about 6,000 head a day and accounts for about 6% of the total United States fed cattle packing capacity.
Perdue said he was responding to calls by cattle ranchers.
NCBA response ...
Missouri Cattlemen’s Association ...
Iowa Cattlemen’s Association ...
Perdue’s probe raises temperature in beef industry
By Dave Bergmeier, High Plains Journal
Sep 4, 2019
When Secretary of Agriculture Sonny Perdue announced in late August he was going to direct the U.S. Department of Agriculture’s Packer and Stockyards Division to launch an investigation into beef pricing margins as a result of the Aug. 9 Tyson plant fire in Holcomb, Kansas, it caught the eye of beef producers at all levels.
Jerry Nine, an Oklahoma cattleman who also operates Woodward Livestock and writes a weekly column for High Plains Journal, has been critical of the pricing process and it was very clear in the aftermath of the fire.
According to his calculations, the price showed about $14.60 per hundredweight difference for a 1,500-pound Choice steer, Nine said, yet none of the cost savings was shared or will be shared with ranchers or consumers. He was hopeful Perdue’s investigation will be thorough and that if it is, it will show price manipulation.
Oklahoma State University Beef Extension Beef Marketing Specialist Derrell Peel said it was natural for producers to be concerned when they saw the plant that represented 6% about slaughter capacity was temporarily idled and the ensuing drop in future prices while demand remained sound.
“There is a lot of blowback that followed and clearly USDA is reacting to that blowback,” Peel said. “It doesn’t surprise me.”
Producers have been concerned about packer concentration as the four largest packers control more than 80% of the packing capacity in the U.S., feeding into a system with a handful of large chains of grocery stores that supply customers, Peel said. Also, it comes in a climate when lawsuits have been filed in recent years to try to make the public more aware of the level of concentration.
“I think USDA felt a need to do something to look into it with the perception right now out in the country,” Peel said.
The process allows outside forces to drive the futures down and then processors can sell the beef as high as they want, Nine said.
“This was a disaster, a catastrophe for the normal cattleman and they raised the prices and then buy the beef that much cheaper. I don’t see any difference,” Nine said. “The government should step in and say that is price gouging over a disaster. They don’t let gas stations raise their prices a $1 a gallon. I don’t see any difference.”
Perdue in his directive asked the USDA’s Packers and Stockyards Division to “launch an investigation into recent beef pricing margins to determine if there is any evidence of price manipulation, collusion, restrictions of competition or other unfair practices,” Perdue said in a statement. “If any unfair practices are detected, we will take quick enforcement action. “USDA remains in close communication with plant management and other stakeholders to understand the fire’s impact to industry.”
Peel said how long that will take is unknown. Historically, the Packers and Stockyards Division is not an agency that responds to short-term concerns in the marketplace, and market concentration would be addressed by other governmental entities. Typically, the Holcomb fire would likely be considered a short-term event and the markets did respond within a week after the fire to return much normalcy.
“It jumped right back up in a week and responded exactly the way I thought it would. I was not as concerned from that standpoint,” Peel said.
Glynn Tonsor, a professor in the Department of Agriculture Economics at Kansas State University, said the surprise development of losing packing capacity led to decreased derived demand for cattle, which depressed fed and feeder cattle prices.
“Moreover, the cold storage stocks situation and uncertainty on event impact led to a large increase in wholesale beef prices,” Tonsor said. “The directional impacts of these changes are consistent with supply and demand responses we would anticipate. A focused analyses considering multiple factors involved, some of which are market-relevant and not explicit to the Holcomb fire, would be needed to comment on magnitude impacts expected versus realized.”
Peel said because of a lag in how the actual numbers are reported by USDA, the first week there was about a 4.6% drop in kill capacity, which reflects the size of the plant being taken off line as the plant slaughtered about 6,000 animals a day. However, within a week, the packing industry adjusted by adding more slaughter capacity, particularly on weekends, and is now within a 1,000 head a week of where it was pre-fire and so in many ways the industry itself helped to keep the capacity in lace to meet demand, he said.
“It is hard to characterize what ‘normal’ is in U.S. commodity markets currently,” Tonsor said. “That said, there have already been some price adjustments partially offsetting the market reaction observed during the week of Aug. 12.”
Margins were also impacted and bore by feeders and packers because they had to take cattle to other plants and that has to be taken into account, Peel said.
However, all of this came at time even before the fire when many in the industry were concerned that aspects of the futures market were depressing prices even though demand appeared to be strong, particularly in the peak summer season, observers have said.
Peel said several questions are at the forefront...
USDA Investigation Into Packing Plant Margins After Tyson Fire Could Take Awhile
Radio 570 WNAX (SD)
Sep 4, 2019
The U.S. Department of Agriculture’s investigation of record beef packer margins following a fire at a Tyson packing plant in Kansas could take some time. USDA Undersecretary for Marketing and Regulatory Programs Greg Ibach says to dig deep into the incident will take weeks or months.
He says several factors led Secretary Perdue to call for an inquiry.
Ibach says his agency intends to do its job and make sure there was no price manipulation in the cattle market...
more, including audio [1:19 min.]