Q: What do you think are the major issues standing in the way of fair cattle markets?
The cattle industry currently has an oligopoly with 80% or more of cattle being processed by 4 companies. On top of that, only 6 feedlot companies feed 25-35 percent of the cattle killed. So we not only have consolidation in the packing sector, we also have growing consolidation in the feedlot sector.
Q: What do you think would be a solution to fix this consolidation within the packing sector?
We either need the big four packers to sell some processing plants, which is very unlikely, or we need to add packing capacity. Regulatory hurdles and capital constraints make either of these options fairly difficult. Also, both of these options are long-term, so even if they do occur, it will take years to see the benefits.
Q: Do you think there are solutions that could be implemented that would increase competition in the near future?
The packers have found a loophole to the packer ownership limitation by way of agreements with formula yards. This has to be taken away.
Our cattle markets need more price discovery. We have no price discovery through formulas because of the confidential rules that are in place. These rules hide the prices that large feedlots are receiving. If formula traders were required to report their base price, along with premiums and discounts regardless of confidentiality, there would be no need for Senator Grassley’s 50/14 bill. However, the government has given these feedlots and processing plants confidentially protection, so there is no other remedy to fix our lack of price discovery other than further government intervention.
Q: What are your thoughts regarding the DOJ investigation into our four big beef processors?
It is unlikely that the current DOJ investigation will reveal much or bring about any change. However, the following data will most likely cause the Senate to ask for some sort of explanation regarding packer pricing;
- Between June 2017 and December 2019, the gross packing sector revenue was between $50 million and $100 million per week. It reached a high of $614 million during the week of May 30th.
- The value of beef minus the value of the cattle for the packing sector during the six weeks following April 15th tripled.
Q: What are your thoughts on imports of cattle and beef?
Free trade is a good thing, but it is problematic at best, price fixing at worst for packers to be able to import live cattle to process at U.S. plants, and for those cattle to take up kill space before U.S. cattle can be processed.
Packers import foreign beef, process it in some way here in the U.S., and then label it as U.S. beef. This should never happen and needs to be stopped.
Q: Do you think our industry has the ability to get on the same page and work towards a common goal?
The largest organization representing cattle producers in Washington, D.C. represent competing interests. When those competing interests are at odds with one another, the organization has their hands tied as to what they can do. For the industry to get on the same page, we are going to have to see change at the producer level. As producers, we have to make our voices heard and set aside our differences and focus on saving our livelihood.