Comments by the Publisher — “The wake-up call has been served.”


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Last week I shared the letter my brother sent to our two Montana Senators.  The packers practices have been totally criminal.

And now, there is a group of four Senators that agree.  Senator Steve Daines (R-MT), Senator John Hoeven (R-ND), Senator Kevin Cramer (R-ND) and Senator M. Michael Rounds (R-SD) all signed a letter that was delivered directly to United States Attorney General William Barr.

That’s right, they bypassed the USDA and went straight to the Department of Justice (DOJ).  The letter in its entirety can be read at the bottom of my comments.

I was driving home from a sale last Thursday when I received a call informing me that Senator Daines, along with North Dakota and South Dakota Senators, were going straight to the DOJ.  Word was given to me that Attorney General Barr was going to draw up papers and serve notice to all four of the packers that a DOJ investigation was to be conducted, and this notice was going to be served immediately.  I was nearly speechless.  I nearly had to pull over to the side of the road as I was shaking and had goosebumps all over my body.

Ladies and gentlemen, this is nothing short of HISTORIC. 

Our father Pat Goggins, along with Leo McDonnell and many others like them, had been trying for 25 to 30 years to get legislators in Washington, D.C., to address the packing industry problems in this country.  They worked tirelessly to get the Department of Justice involved and investigate in hopes of bringing justice to the packing industry.  The problem had always been there were no legislators who would step up and take on the packing industry.  Well, now we have some willing helpers in D.C.

In my opinion, it took a national disaster like the “China Virus” to truly expose how the packers have been doing business over the past 25 to 30 years.  I don’t care where you live, what you do for a living, or if you are a democrat or republican… the one major thing on everyone’s mind is FOOD.

My daughter lives in New York and has been under quarantine.  She called me the other night, very concerned.  The shelves at the grocery stores are bare and everybody is wondering if and when shelves will be restocked.  Nothing like this has happened since the Great Depression, or maybe World War I and II.

Something good always seems to come out of disasters.  America is being woke up to the fact that their food is produced by the hard-working agriculture industry, not just the grocery store.

And now, because of this disaster, the packing industry is finally being investigated.

I cannot tell you how proud I am of both our Montana Senators.  Senator Daines and Senator Tester have been true leaders through this crisis, and not just for Montana agriculture but agriculture across the nation.  Both men are stepping up and doing Montana proud.  It’s nice to see democrats and republicans working together for the good of the people.

We received this historic news on Thursday, March 19 and just one day later – Friday, March 20 – Tyson came out and offered and additional $5 per cwt. for live cattle and $7.94 per cwt. to dressed and grid cattle they had purchased earlier in the week.

Tyson’s actions last Friday were absolutely an admission of guilt, in my opinion.  Rumor had it Saturday morning at 8:00 a.m., fed cattle were purchased for $121 – early Saturday morning, mind you.

The wake-up call has been served.

If you get a chance, go to the calendar you have hanging on your wall and circle March 20, 2020.  This is going to be a historical date marking the “beginning of the end” on how the packing industry does business.

Ten years from now, the four Senators from Montana, North Dakota, and South Dakota will be considered national heros for showing the intestinal fortitude to take on the packing industry, and most likely, saving the American rancher and feeder.

Things got a lot better in the live cattle markets Friday and Saturday, but weigh-up cows also jumped $30 to $40 per cwt. as well.  The cow and bull processing facilities followed suit as well.  Hamburger is in great demand.

Now, here is the thing we all must do – do not take the foot off the gas pedal.  Despite the sign that things may get better, we must all charge on full speed ahead on the packers’ business practices.  Two major things must happen:

  • Investigate the packers and take action to bring the packing industry to justice; and
  • Come up with a mechanism on how these fed cattle are priced and how the prices are tied in to the Chicago Mercantile Exchange.

This process will certainly not happen overnight.  Who knows how long it will take, but it is imperative we get it right now that we have this amazing and historical chance to finally do it.

The four Senators already on board need as much help as they can get.  Each and every one of you need to call your representatives in Congress and demand they sign on to the letter to the DOJ.

We can’t afford to take our foot off the gas now.  Food is on the minds of all our lawmakers, so now is the perfect time to put some pressure on and urge them to assist the four who wrote this historic letter.  Please don’t lay back just because the markets are getting better.  They are soon to get A LOT better, but your help is needed.  Call now.

 

Letter:

March 19, 2020

The Honorable William Barr
Attorney General
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530

The Honorable Makan Delrahim
Assistant Attorney General
Antitrust Division, U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530

 

Dear Attorney General Barr and Assistant Attorney General Delrahim:

We write to urge the Department of Justice to investigate continued allegations of (“meat packer”) price fixing within the cattle market and to examine the current structure of the beef meatpacking industry for compliance with U.S. Antitrust law.

Just last summer, we saw the most recent allegation that resulted in the United States Department of Agriculture’s Packers and Stockyards Division initiating an investigation.  In his press release statement on August 28, 2019, Secretary Sonny Perdue stated, “as part of our continued efforts to monitor the impact of the fire at the beef processing facility in Holcomb, KA, 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.”  This investigation is still under review.  However, the continued effect of diverging profits and losses along the supply chain compared to high end-consumer prices further demonstrate this ongoing issue.  We strongly believe the resources of the Department of Justice Antitrust Division are needed in order to adequately investigate these allegations.

Over the last few years, the packing industry has enjoyed considerable profits.  At the same time, cattle ranchers are producing at a net loss.  Packers are in a unique position within the supply chain to exert control over the input of cattle that they buy from cattle producers, and, based on those controlled inputs, can control the supply available to downstream purchasers.  According to a large volume of our constituents and member organizations within our states, allegations continue to surface against packers for price-fixing schemes designed to undercut competition.  Because of this, we take these claims seriously.

To further illustrate these concerns, consider the live cattle prices compared to the cost of processed boxed beef.  On February 14, 2020, USDA updated its U.S. Red Meat and Poultry Forecasts, projecting quarterly average beef prices.  The forecast projected live cattle prices for quarter one (QI) to average $123 per cwt and $118 per cwt for Q2.  Since March 13, 2020, live cattle futures all fell below $100 per cwt for the next 12 months.  Meanwhile, the average boxed beef price for week-end of March 13, 2020, was $207 and closed on March 13, 2020, at $208.14.  Further, as of yesterday’s closing date, boxed beef has slightly risen to over $247, that’s a 20 percent increase in price for processed boxed beef in only five days.

At the same time, cattle producers are operating at a significant net loss.  The bottom line is that there is clearly an ongoing – and under certain circumstances an increasing – inverse relationship between live weight and retail prices to consumers.  The real or perceived existence of manipulative price control is further enhanced by the packers’ ability to control the timing and volume of slaughter.  This further highlights why we find these allegations to be worthy of the Department of Justice’s review.  Specifically, whether these industry practices and price reports collected and reported by USDA, warrant an investigation for price fixing under current U.S. Antitrust law?

In addition, the four largest meat packing companies control approximately 80 percent of the beef processing in the United States.  This consolidation of economic influence on the cattle market is cause for concern.  It warrants review as to whether the inherent nature of the existing industry results in compliance with the law and/or an unfair disadvantage to producers and consumers.  Based on the current meatpacking industry structure and its resulting impacts, does this concentration of market power amongst the four large packers create an unfair oligopoly in contradiction with U.S. Antitrust law?

At a time when cattle producers are seeing record losses and bankruptcies, now exacerbated by the COVID-19, compared to the shelf price of meat at record highs-these margins fail to make sense.

We ask that the Department of Justice Antitrust Division evaluate these dual concerns thoroughly and expeditiously in order to protect the integrity of America’s failing beef industry.  Thank you for your prompt consideration of this important matter.

Sincerely,

Michael Rounds, United States Senator

Kevin Cramer, United States Senator

Steve Daines, United States Senator

John Hoeven, United States Senator 

 

 

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