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USDA launches cattle market investigation

Perdue says agency will take quick enforcement action if any unfair practices are detected.

Agriculture Secretary Sonny Perdue announced Wednesday that the U.S. Department of Agriculture is launching an investigation to ensure that cattle markets have remained fair following the Aug. 9 fire at the Tyson Foods beef plant in Holcomb, Kan.

“As part of our continued efforts to monitor the impact of the fire at the beef processing facility in Holcomb, Kan., I have directed USDA’s Packers & 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.”

Perdue said he knows it is a difficult time for the industry right now and added, “USDA is committed to ensuring support is available to ranchers who work hard to the feed the United States and the world.”

National Cattlemen’s Beef Assn. president Jennifer Houston issued a statement regarding Perdue’s announcement, saying, "Today’s announcement by Secretary of Agriculture Sonny Perdue demonstrates the government’s understanding of the extreme strain placed on the cattle industry by the plant fire in Holcomb, Kan.”

She continued, "We encourage USDA to look at all aspects of the beef supply chain and to utilize internal and external expertise in this investigation. We believe it adds transparency that will help build confidence in the markets among [cattle producers]."

Many state cattle producer associations also welcomed the announcement.

The Iowa Cattlemen’s Assn. (ICA) applauded the decision, explaining that over the past two weeks, cattle producers have expressed concern that changes in the live cattle and boxed beef markets since the fire were unjustified. ICA said it has been working on behalf of members across the state to provide market certainty via monitoring.

ICA president David Trowbridge said, “We recognize that there are market fundamentals at play, but given the extreme effect the current market conditions are having on Iowa’s cattle industry, we believe it is in our members’ best interests to eliminate any doubts regarding the market reaction.”

Missouri Cattlemen's Assn. president Bobby Simpson said cattle producers have sound reason to question market events that transpired after the Holcomb fire and thanked the agency for listening to industry concerns.

“While a sharp decrease in slaughter capacity was anticipated, slaughter actually increased some 9,000 head from the week prior to the fire,” he said.

Further, he said most expected this market disruption to cause uncertainty, but few could believe that in one week fed cattle prices would drop 5% and Choice boxes would spike 9% while total slaughter increased. This transpired even as feeder calf prices plummeted, he noted.

“The financial woes do not reside within one segment of the industry. It impacts the entire chain and causes lending institutions a high level of uncertainty as equity dwindles across the board," Simpson said.

He continued, "We back Secretary Perdue's investigation into the market reaction in live cattle markets and boxed beef subsequent to the Holcomb fire. There is no harm in conducting an investigation to ensure integrity of the markets and to respond to the justified concerns of thousands of U.S. cattle producers. In fact, it's simply the right thing to do. No matter the result of the investigation, good can come from better understanding what took place and how to best mitigate future disruptions."

The Packers & Stockyards Act was signed by President Warren Harding in 1921 to address concerns about anticompetitive activities among meat packers. The act has been updated by Congress many times since then. Section 202 of the act states that it is unlawful for packers to “engage in or use any unfair, unjustly discriminatory or deceptive practice or device” or “engage in any course of business or do any act for the purpose or with the effect of manipulating or controlling prices or of creating a monopoly in the acquisition of, buying, selling or dealing in any article or of restraining commerce.”

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