Weather Forecast

Close

Business

A graphic in a lawsuit filed against the "Big 4" packing plants by R-CALF USA and ranchers shows how fed cattle prices have dropped off more dramatically than retail beef prices. The plaintiffs in the case accuse the packers of taking illegal actions to artificially keep beef prices low. (U.S. District Court)

R-CALF USA, cattle feeders sue packing plants

BILLINGS, Mont. — R-CALF USA and four cattle-feeding ranchers from Iowa, Nebraska, Kansas and Wyoming have accused the nation's four largest beef packers of violating federal law by unlawfully depressing the prices paid to ranchers.

R-CALF CEO Bill Bullard said in a statement that the lawsuit is an attempt to see cattle ranchers in the U.S. "compensated for years of significant losses."

"R-CALF USA is taking this historic action to fulfill its promise to its members to prevent the Big 4 packers from capturing the U.S. cattle market from independent U.S. cattle producers," Bullard said.

R-CALF USA, or Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America, is a producer-only cattle trade association. The organization, along with Weinreis Brothers Partnership, Minatare Feedlot Inc., Charles Weinreis, Eric Nelson, James Jensen doing business as Lucky 7 Angus, and Richard Chambers as trustee of the Richard C. Chambers Living Trust, sought class action lawsuit status last month in U.S. District Court in the Northern District of Illinois against the packing plants and asked for a jury trial on the allegations. Two classes are represented in the suit: cattle producers who sold fed cattle to any of the "Big 4" beef packers since January 2015 and traders who transacted live cattle futures or options contracts on the Chicago Mercantile Exchange since January 2015.

The lawsuit accuses Tyson Foods Inc., JBS S.A., Cargill Inc. and National Beef Packing Co. LLC and some affiliates of those companies of violating U.S. antitrust laws, the Packers and Stockyards Act, and the Commodity Exchange Act by conspiring to depress the price of fed cattle they purchase from American ranchers in order to inflate their own margins and profits.

The complaint alleges that the packing plants conspired to artificially depress fed cattle prices through a number of avenues, including by reducing slaughter volumes and purchases of cattle sold on the cash market to create a glut of slaughter-weight fed cattle, manipulating cash cattle trade to reduce price competition, transporting cattle from Canada and Mexico even when it was uneconomical in order to depress prices, and closing slaughter plants to ensure underutilization of packing capacity.

R-CALF and the ranchers allege the practices of the packing plants have depressed fed cattle prices by 7.9% since January 2015.

The "Big 4" packing plants collectively purchase and process more than 80% of U.S. fed cattle.

The lawsuit explains that strong beef demand and a shortage of fed cattle during droughts of 2011-13 led to fed cattle prices increasing from 2009-14. Prices peaked in November 2014, and the industry expected the price to stabilize in 2015 and continue at or around the same level for years.

"This widely predicted price stability did not occur," the lawsuit said. "Instead, Packing Defendants used their market power, price sensitivities, and the thin cash cattle trade to their advantage and embarked upon a conspiracy to depress fed cattle prices."

Though fed cattle prices have dropped, beef prices have not decreased, the lawsuit said.

The lawsuit says a witness who used to work at one of the packing plants has provided proof of illegal practices.

randomness