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US cattle lobby group seeks inquiry into ‘anti-competitive’ conduct

Beef Central, 15/01/2016

US beef industry activist group R-Calf has filed a formal request to the US Senate Committee on the Judiciary seeking an investigation into potential anti-trust and anti-competitive conduct in the US cattle and beef markets.

In a move which has parallels with similar government-led inquiries conducted in Australia last year, R-Calf is asking the Senate committee to investigate 13 specific issues including:

  • the cause for the dramatic, unprecedented collapse of US cattle prices in 2015
  • whether there were structural problems in the US cattle market that contributed to the price collapse in 2015; and
  • whether dominant meatpackers or other major market participants engaged in unlawful conduct that adversely influenced the US cattle futures market and cash cattle market in 2015.

In its request, the group provided evidence which it suggested indicated that anti-trust and anti-competitive conduct by dominant meatpackers and certain traders in the cattle futures market in 2015 had caused a ‘severe anomaly’ in US cattle markets.

That anomaly, according to R-Calf, caused an “unprecedented extraction of equity from the US live cattle industry,” and harmed consumers as well.

In its background notes to the Senate Committee, R-Calf explained that extremely tight cattle supplies and growing beef demand were among market fundamentals cited by analysts to support projections for strong cattle prices throughout 2015, and for up to three years beyond.

“During the first half of 2015, those projections were spot-on,” the group said, “but then something went awry.”

R-Calf said that in the latter part of 2015, US cattle prices “collapsed farther and faster than during any time in history and the unprecedented volatility in the cattle futures market rendered it useless for price discovery purposes.”

The group provided documentation suggesting that independent cattle feeders lost more than $500 per head during the collapse and, consequently, “the very foundation of the US cattle industry’s feeding sector – its independent cattle feeders – was irreparably damaged.”

But as cash cattle prices plummeted and cattle futures prices fluctuated with extreme volatility, dominant meatpackers were benefiting from what one industry commentator referred to as ‘gangbuster profits’, R-Calf submitted.

Meanwhile, US consumers continued paying at or near record high prices for beef.

In further support of its request, R-Calf suggested that analysts had characterising the 2015 price collapse with phrases such as ‘market meltdown’ and ‘psychological upheaval,’ indicating that they either did not know or they would not say what actually caused the catastrophic price collapse.

 

  • R-Calf USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) claims to be the largest producer-only cattle trade association in the US. It aims to be a national, non-profit organisation dedicated to ensuring the continued profitability and viability of the US cattle industry.

 

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Comments

  1. Paul D. Butler, 15/01/2016

    R – CALF is a bad joke over here on this side of the pond.

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