Last week we talked about the class action lawsuit filed by R-CALF USA claiming that the big four beef packers colluded to cut production and force cattle prices lower. Just a few days after the R-CALF suit was filed, a consumer advocacy firm—Hagens Berman Sobol Shapiro LLP (HBSS) from Minneapolis—filed a suit for two individuals claiming that the same packers were fixing the price of beef to consumers since 2015.
It’s kind of odd to me that these suits both start with the packing industry; one goes in the direction of producers being harmed and the other goes in the direction of consumers being harmed. Ironically, both suits have almost an identical way of laying out their case. My suspicion is that these suits are connected in some way. R-CALF has denied even knowing about the suit, but we live in a very tangled web of legalese today. We have a variety of adversary groups, even within our cozy beef industry, that are capable of, or have associations with, groups that can attempt to inflict this kind of damage to the entire beef industry.
This law firm, HBSS, appears to have specialized in the meat and protein business and has suits pending against the hog and poultry industries for the same thing—price fixing. They won an award several years ago of $57 million from dairy processors. The common denominator appears to be a market analytical firm called Agri Stats that does supply and demand forecasting and data collection on several commodities. It’s a private firm that provides its services—market research—by subscription. Outfits like this are quite common across many industries.
One thing I do know is that these suits are bombshells for the beef industry. These suits could inflict lots of damage to our industry and I don’t care which segment you represent. You threaten the price of retail beef and everyone involved in the beef industry will feel the pain of lower prices. If these suits were initiated by someone involved in the beef industry, they haven’t thought this thing through. Or, they are so incensed with hate they have lost any sense of rational thinking.
Right or wrong, we do have adversaries within our industry; you know who they are. Last week the average fresh beef price was $5.71/lb. This is a lot of money spent on the beef industry by consumers. I can’t imagine that any producer would complain that we’re selling beef for too much money. When the market was at its peak, average retail was around $6.20 per pound.
I will say that how that money is distributed to the various segments of the beef industry doesn’t seem quite right. We all know that a free market swings both ways. In 2014 calves were worth $3 a pound, yearlings were over $2 and packers were losing money hand over fist. Producers were making money hand over fist. Typically, we call this the cattle cycle, which is simple supply and demand logic.
Markets are complicated, especially meat markets. These attorneys want to boil it down to a simple commodity, like wheat or corn. I would think that many beef producers would be insulted if you referred to their cattle as commodity cattle. We produce cattle for a multitude of markets that have many price points: Natural, NHTC, CAB, Prime—these are all program cattle, produced for a specific market. They are not commodities any longer. There are lots of moving parts that affect the price of cattle and the price of beef, more than you can imagine.
These suits start with the big four packers. We’ve always had the big four; they have gone by different names over the years, but four packers have been a dominating factor for 100 years. What are these suits going to do with the rest of the beef packing industry, the small guys? They enjoyed the same market as the big boys did. Are they guilty of collusion too? Do they get off scot-free because they are smaller players? They made the same kind of money.
Both of these suits did their share of court shopping, just like they’ve done before. They will opt for a jury trial and tug at the emotions of the jurists, just like they did in Pickett vs. Tyson in 2004. They will use terms like “collusion,” “cartel.” They may even use terms like “factory farming” or “industrial agriculture,” and we may even hear global warming mentioned. They may get a favorable decision from the jury. Then it will be appealed, and the judges will overturn it based on fact. This is another industry charade that wastes our time and resources. — PETE CROW
