Ten executives in the chicken industry have been indicted on price fixing and it looks as if the Department of Justice (DOJ) has compelling evidence. Then the pork and the beef industry had price fixing cases dropped recently, and some are still pending. I suppose if the government is the plaintiff, you better watch out because they will find something with the endless resources they have.
We’ve seen individuals bring class-action price-fixing cases before the government many times, calling the meat packing industry the culprit, the conspirator. The two market jolts the beef cattle business has had in the last 13 months have been brutal on cattle feeders because they have had to endure the long hard process of building market value in fed cattle. If we didn’t have this COVID-19 thing, would we still have held the market at $120 or better? Perhaps. But we all know that it’s not fun to see the producer side take a hit when the processor side enjoys huge profits.
It’s been about four months since the DOJ’s anti-trust division subpoenaed the big four packers. Tyson came running to DOJ’s aid and the other packers sort of shrugged it off. Remember one thing: All these beef packers really do dislike each other and are competitive, to a degree.
Packers have processing capacity down to a fine science as the Holcomb, KS fire showed us. We process about 650,000 head a week on average; sometimes higher sometimes lower, based on seasonality. The current answer to this problem is for producers to operate smaller packing facilities.
There have been two outfits announce they are building plants in Idaho; several plants have been resurrected in the Midwest—500- to 1,000-head facilities. It’s hard to make these operations work, usually because of the byproducts. But if you can do something special and sell it for a premium, it should work. In my opinion slaughter plants don’t make money; the money is made in further processing. I’ve seen many outfits make it work.
We hear that folks want to know where their meat came from. That’s great and these smaller packing plants can service that market with special steaks, special types of ground beef. I’ve seen plenty of folks make it work. Now we’re trying to change laws where state-inspected beef will be the equivalent of USDA-inspected beef, or pork; let’s not leave the other guys out.
Back on the DOJ. They have had a big score in the chicken business, and the same companies are in beef and pork. So, I’m sure they smell blood in the water. Tyson came to the table first, willing to cooperate. So if they did get caught doing something wrong, the courts would be lenient.
The DOJ is going after the food processing industry. They caught the CEO of Bumble Bee Seafoods, the tuna guys, of price fixing and was sentenced to three years. “The Department of Justice is trying to send a message with the lengthy jail time, which is more than double the average of 14 to 18 months,” said Scott Wagner, a partner at Blizin Sumburg, attorneys, in an article in Food Dive.
Wagner also said, “Nobody likes to go to jail. Business executives going to jail for 10 minutes would be a deterrent.” The article went on to say that the DOJ is more focused on prosecuting executives because it is a more effective disincentive in these cases, and allegations in the food industry are piling up now that more seek leniency and deals to avoid charges.
Stewart went on the say that “cases just sort of build that way, and I think that’s why you’re starting to see this increased focus in the food industry [as] one case just sort of leads to another.” Assistant Attorney General, Makan Delrahim, of DOJ’s antitrust division said, “Executives who cheat American consumers out of the benefits of competition will be brought to justice, particularly when their antitrust crimes affect the most necessity, food.”
I really don’t know if CEOs in the beef packing business are shaking in their boots, but I would be worried. Just the thought of DOJ’s antitrust division and their unlimited resources would cause many sleepless nights. Be reassured: DOJ will find something. It may be Yogi Bear stealing picnic baskets or Tweety Bird poking around the grain bin, they will find something. They won’t quit until they do. — PETE CROW