Iowa Sen. Grassley Could Seek Judiciary Hearing on Cattle Price Drop
BY DTN/Progressive Farmer
via KTIC (NE) – January 13, 2016
The recent collapse in cattle prices has the attention of the U.S. Senate Judiciary Committee’s chairman.
In a teleconference with agriculture reporters Tuesday, Sen. Charles Grassley, R-Iowa, said cattlemen in Iowa have told him there are few market reasons for a price drop of around $50 in the final months of 2015. R-CALF USA formally asked Grassley’s committee last week to consider opening an investigation into the cattle market.
Though the senator stopped short of saying price collusion is a possible explanation, he said it may be time for the committee to consider holding hearings.
“If the accusations are credible, I think I would have a responsibility to look into this,” Grassley said. “Any violation of antitrust laws I’m very willing to look into. It has been a long time since the judiciary committee was involved in such issues.”
Iowa cattlemen, he said, pointed to the end of country-of-origin labeling, or COOL, as a possible explanation for price drops. “It is still low,” Grassley said about prices. “COOL is out of the way, and the cattlemen I talked to didn’t seem to have a reason for the price coming down.
“It ought to lead DOJ (U.S. Department of Justice) to do its job of enforcing antitrust laws and watching over it. I’ve always felt most people working in the antitrust division at DOJ didn’t have a lot of understanding of agriculture.”
In the formal request letter to Grassley’s committee, R-CALF USA said the latest price drop should be investigated.
R-CALF USA President Bill Bullard told DTN Tuesday he has been invited to brief Grassley’s committee staff. The U.S. Department of Justice and USDA have been “unresponsive” to the group’s concerns, he said.
“I will soon be making a presentation to them in hopes that a hearing will be scheduled,” Bullard said. “We have known for a long time that our markets are broken, and if you look at the history of U.S. cattle prices, never before have we witnessed such a collapse… What we know with certainty is that this was not a natural phenomenon.”
Chase Adams, communications director for the National Cattlemen’s Beef Association, said R-CALF’s accusations are without merit.
“We continually look at the market and work with our stakeholders to ensure the markets are working to meet their needs, including reauthorization of mandatory price reporting, and we don’t see any merit in this request,” he said. “It is only another misguided attempt to gain relevance.”
In its letter to the committee, R-CALF pointed to market fundamentals in 2014 and in the first half of 2015 that supported “historically high” cattle and beef prices. The fundamentals included “tight” cattle supplies and growing beef demand. “Government and private economists alike predicted higher prices well beyond 2015, and there were no observable disruptions to the favorable market-sustaining fundamentals at any time during 2015,” the letter said. “Yet, cattle prices collapsed.”
During the third and fourth quarters “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,” R-CALF said. Independent cattle feeders suffered losses exceeding $500 per head.
“Industry analysts cannot explain the wholesale collapse of the cash market or the intense volatility and collapse in the cattle futures market,” the letter said. “Describing the collapse and volatility with vague terms such as market meltdown or psychological upheaval, analysts appear unwilling to state the obvious: that something caused a severe anomaly in U.S. cattle markets that caused significant harm to U.S. cattle producers and U.S. consumers.”
DTN Livestock Analyst John Harrington said there are a number of factors that led to first the rise in cattle prices in 2013-14 and the recent collapse.
The short answer: It’s complicated…
R-CALF calls for investigation of packers, traders
Carol Ryan Dumas, Capital Press
January 12, 2016
R-CALF USA has filed a formal request with the Senate Judiciary Committee alleging packer misconduct in the collapse of U.S. cattle prices in the latter part of 2015.
R-CALF USA is calling on the Senate Judiciary Committee to investigate the collapse in cattle prices last fall and potential antitrust and anticompetitive conduct by dominant meatpackers and certain traders.
Against widely held predictions of strong cattle prices for 2015 by market analysts and USDA, “cattle prices collapsed farther and faster than during any time in history” in the latter part of 2015, the organization wrote in its request.
In addition, the R-Calf asserts that unprecedented volatility in the cattle futures market rendered it useless for price discovery, benefiting the dominant meatpackers.
R-CALF cited a $41.35 per hundredweight decline in the five-market fed steer price in December compared with the first half of 2015, correlating to a nearly $517 per head loss at the feedlot. It also stated the downward trajectory of cattle prices in the latter part of 2015 can’t be correlated with market fundamentals that included lower beef production and higher retail beef demand in the first three quarters of the year.
R-CALF’s nine-page request to investigate 13 specific issues , including whether there are structural problems in the U.S. cattle market that contributed to the price collapse and whether the meatpackers or other major market participants engaged in unlawful conduct that adversely influenced cattle futures and cash markets.
R-CALF’s allegations put the industry right back to where it was five to six years ago when the Grain Inspection, Packers & Stockyards Administration did a wholesale investigation of alleged anti-competitive practices, said John Nalivka, meat industry analyst and owner of Sterling Marketing, Vale, Ore.
“This issue’s been decided more than once,” with no evidence of structure or pricing harming competitive markets, he said.
He understands the frustration. Prices fell hard last fall and suddenly the market seemed to be falling apart after analysts had said prices should be strong, he said.
But there was a lot at play. Cattle weights were high, supply was increasing, demand was slowing and there was a lot of pork and chicken in the market, he said.
“I don’t think packers were to blame for that. Demand went into a slump, and wholesale beef prices also came down,” he said.
With record prices in 2014 and the first half of 2015, everybody had “very high” expectations that market would continue, he said…