Amid calls for livestock market reform, JBS USA settles lawsuit against big packers

Leaders of the National Cattlemen’s Beef Association said Wednesday the group was “disturbed” by a $52.5 million settlement reached by JBS USA Food Co. and a group of direct meat buyers in a massive class action lawsuit against the four largest beef packers and their subsidiaries.

The court case and settlement reached by JBS on Tuesday involves price-fixing and restricting the supply of fed cattle by the big four packers. The settlement has prompted the NCBA to question what happened to livestock industry demands for a federal investigation into beef markets dating back to 2019. The court case dates back to at least 2015 as buyers alleged that packers and their subsidiaries were seeking to suppress slaughter volumes to drive up the price of beef.

The Justice Department began investigating the meatpackers in 2020 as JBS, Tyson and others admitted in the spring of 2020 to receiving subpoenas for information. The USDA, under the Trump administration, also launched a livestock market practices investigation after a major price spike in live cattle and boxed beef following the August 2019 fire in the Tyson plant in Holcomb, Kansas.

The NCBA and other groups have repeatedly called on the Justice Department to release certain findings from its investigation.

YOU WANT TOTAL TRANSPARENCY

“American cattle producers expect and deserve full transparency on all information related to ongoing market investigations. The NCBA encourages the government to finalize its investigation so that we can fully understand any harm that may have been caused,” said NCBA’s Colin Woodall. CEO. “It is clear from this settlement that cattle producers still do not have all the information they have requested and deserved. The DOJ has an obligation to complete its investigation. Cattle producers have no not years of waiting for the government to determine if there has been wrongdoing; we demand answers now.”

The lawsuit in the U.S. District Court in Minnesota includes dozens of plaintiffs, “direct purchasers,” who sued Cargill Inc. and its subsidiary, Cargill Meat Solutions; JBS and its subsidiaries; National Beef Packing Co.; and Tyson Foods and its subsidiaries.

Direct buyers filed their first complaints in June and July 2020 amid high volatility in cattle prices and canned beef prices caused by the COVID-19 pandemic. The original claims were dismissed, but the various buyers amended their complaint and the federal court has since denied the packers’ motions to dismiss the claims.

The plaintiffs alleged that the packers “conspired to drive up the price of beef in order to achieve exorbitant markups” in violation of the Sherman Act. The direct buyers allege that the packers engaged in price fixing by “restricting the supply of beef into the United States through various means and engaging in other collusive behavior.”

The direct buyers plaintiffs have agreed to settle with JBS in the case, citing both the $52.5 million payment offered by JBS and the company’s “extensive cooperation” in the direct buyers’ ongoing litigation against the other meat companies. In addition to the money, JBS agreed to provide counsel to “summarize the principal facts known to it that are relevant to the alleged conduct, market and industry players involved,” the settlement memo states. proposed.

FRUSTRATED CATTLE FARMERS

The case against the Big Four Packers, the JBS settlement and NCBA’s frustration at the lack of progress with the Justice Department all highlight the frustrations of cattle ranchers who have spent the better part of two and a half years to call for investigations, legislation and reforms for the Packers and Stockyards Act.

Underscoring the frustration, a group of ranchers often at odds with the NCBA — R-CALF USA — also released a letter Tuesday from 16 state attorneys general in late 2021 to Agriculture Secretary Tom Vilsack outlining the issues producers are facing. confronted and urging Vilsack to help find solutions.

In short, top law enforcement officials in those states told Vilsack that they could have a “significant impact” on agricultural market concentration, but they needed the financial resources to build their cases against the packers.

“To that end, the USDA should consider using funds allocated through the American Rescue Plan Act of 2021 to establish a grant that state antitrust authorities could use to investigate and take action in agricultural markets,” the letter reads.

MEANING OF THE LETTER

R-CALF USA CEO Bill Bullard said the significance of this letter signed by 16 state attorneys general cannot be overstated. “This confirms the concerns our organization has expressed to Congress and the executive branch for many years and contradicts the call for maintaining the status quo embraced by leading industry-oriented agricultural economists and producer groups aligned with packers.”

The attorneys general told Vilsack, “Aggressive antitrust enforcement is essential to improving the resilience of the food and agriculture supply chain, and USDA grants to states interested in investigating agricultural markets will bolster those efforts.” .”

The attorneys general also called on the Biden administration to step up enforcement of the Packers and Stockyards Act, which the administration has announced it will do.

“For more than a century, the Packers and Stockyards Act has served as an important tool to ensure fairness in livestock and poultry markets and to protect the integrity of those markets,” the authorities said. AG.

“Structural changes in these markets, including increased concentration and changes in sales and marketing practices, have threatened the viability of producers, leading to attrition and reducing the number of producers participating in livestock markets. “With increased government enforcement and oversight, the promise of the Packers and Stockyards Act can be delivered and restore competition to these vital U.S. markets.”

The letter was signed by attorneys general from a wide geographic range, including Idaho, South Dakota, Minnesota, Wyoming, Iowa, California, Delaware, Hawaii, Illinois, Maryland, Nevada, New Mexico, North Dakota, Oregon, Rhode Island and Utah.

The attorneys general said that as there are few new market entrants and current market participants are ramping up production, it shows livestock markets are in “poor” health.

“Neither new entrants nor existing entrants have increased production, including during times when demand for meat products is increasing,” the GAs said.

MORE TO LOOK FOR

Additionally, the attorneys general asked the USDA to consider investigating whether alternative marketing arrangements and vertical integration in livestock markets “distort price discovery” and other market conditions. .

“AMAs may seem beneficial to producers because, at least initially, they offer a premium, or ‘bump’, over spot markets, but they don’t provide a fixed price and aren’t made public for tenders from interested producers,” the AGs said. said in the letter.

“Instead, these are exclusive offers to specific producers and directly linked to prices discovered in regional spot markets or other price indices, such as those provided by third-party data services that packers and processors can influence and even manipulate with coordinated efforts. This creates a problem for all producers.”

The attorneys general said that while there is a need for market reforms, there is “no substitute for maintaining a vibrant and open cash market”, particularly as AMAs bind prices at a spot market.

“Many regulators have a role to play in ensuring agricultural markets are fair and competitive,” the AGs said.

The White House opened 2022 with President Joe Biden outlining plans to tackle what are seen as unfair trade practices by meat packers. Biden said the price gap between what packers receive and what livestock producers receive “reflects a market distorted by lack of competition.”

Source: DTN