WASHINGTON — The U.S. Department of Agriculture has been working with the U.S. Justice Department this spring to analyze whether the nation's largest meatpackers are unfairly driving down cattle prices, and some industry observers believe that the agency may soon release a stricter set of antitrust rules governing how cattle can be bought and sold. The 2008/2009 Farm Bill required a review of the current rules, and required new regulations to be in place by this summer.
Independent rancher groups, led by Billings, Mont.-based R-CALF USA, have been arguing that consolidation within the meatpacking industry has led to a situation where the nation's four largest beef packers now buy more than 85% of the nation's fed cattle.
And, these major buyers are purchasing less and less cattle on the open cash market, opting instead to make prearranged deals with feedlots and ranchers. Those deals, in turn, make it difficult for ranchers to leverage the industry's historic cycles of supply and demand, but ranchers and feedlot operators who refuse to make similar deals face a rapidly shrinking open cash market.
Partly as a result of these trends, cash market prices for cattle have decreased about 5% during the past two decades, according to a report by the Associated Press.
“The cattle industry is fast going the way of the hog and dairy industries that already have lost 90% and 80% of their respective industries' participants within the past 30 years — since 1980,” the group wrote in a State of the Industry overview sent to the USDA and Justice Department in January.
The USDA is expected to issue a draft of new rules for public comment soon. Antitrust regulations, such as those maintained by the Federal Trade Commission, traditionally focus on how increased competition would benefit consumers, and in that regard, this case could be very difficult to decide.
It is also difficult to estimate the near-term impact that any new industry regulations might have on wholesale or retail prices. However, in February, the USDA estimated that U.S. cattle inventories are currently at their lowest level since 1959, so ranchers could have a lot of leverage to raise prices if the agency decides to limit long-term arrangements between buyers and sellers of cattle.