The Agriculture Department made a series of recommendations to Congress on Wednesday for addressing price volatility in cattle markets, but left the industry in the dark about the results of an investigation into alleged price manipulation by beef processors.
The recommendations include strengthening USDA's enforcement tools and changes to reporting for prices and cattle delivery. The report also suggests changes the department could pursue internally, including improved risk management tools for producers and expanded lending to small meat processors through USDA Rural Development programs.
The investigation was launched after a fire at a Kansas beef packing plant that caused accusations of price manipulation to fly around the industry. The probe was expanded this spring following the market disruptions sparked by the slowdown in processing amid the COVID-19 crisis.
The report issued by USDA's Agricultural Marketing Service said the "investigation into potential violations is ongoing, and therefore, AMS has limited ability to publicly report the full scope and status of the investigation."
Agriculture Secretary Sonny Perdue said that the two events that led to the launching and eventual expansion of the investigation “clearly disrupted the markets and processing systems responsible for the production and sale of U.S. beef.”
“While we’re pleased to provide this update, we assure producers that our work continues in order to determine if there are any violations of the Packers and Stockyards Act,” Perdue added. “If any unfair practices are detected, we will take quick enforcement action.”
In the report, AMS also suggested changes to USDA programs that would benefit small and medium-sized processing facilities, and amendments to the Packers and Stockyards act that would give USDA with investigative and enforcement tools "on par with those of our Federal partners.”
In a statement to Agri-Pulse, Senate Agriculture Committee Chairman Pat Roberts, R-Kan., said that "while USDA didn’t identify any findings of wrongdoing, they did provide some considerations for stakeholders to weigh. I welcome continued dialogue with cattle market participants to understand their perspectives from the report and how Congress and the administration can work with them to ensure market transparency.”
At one point, Greg Ibach, USDA's undersecretary for marketing and regulatory programs, expected the investigation would be wrapped up by the end of 2019, but in April, Perdue announced that the probe would be expanded to explore “the causes of divergence between box and live beef prices," beginning with the Kansas fire and continued with coronavirus-related disruptions.
The report also said that USDA “does not solely own investigatory authority over anticompetitive practices in the meat industry and has been engaged in discussions with the Department of Justice (DOJ) regarding allegations of anticompetitive practices in the meat packing industry. Should USDA find a violation of the Packers and Stockyards Act, it is authorized to report the violation to DOJ for prosecution.”
The Department of Justice was also reportedly looking into the issue and sent civil investigative demands to the four major meatpackers in June.
Ibach told Agri-Pulse on Wednesday USDA’s investigation is “continuing, and if we find anything that would be appropriate to forward to DOJ, we would do that.” He declined, however, to say whether or not USDA had referred any action to DOJ at this point, citing the ongoing nature of the investigation.
Ibach said that the AMS report would likely be the final public comments from USDA on the issue barring any further action taken in concert with DOJ.
“We really don’t feel that we’re going to have an additional report or an update to this report,” he said. “If we find anything that we need to discuss with the Department of Justice, we will do that and work with them on any follow up actions that would be appropriate.”
The lack of conclusions from the investigation was frustrating to many in the industry, including Rep. Dusty Johnson, R-S.D., who pressed Ibach on the issue at a House Agriculture Subcommittee hearing Tuesday.
“I don’t know to what extent there was market misconduct, but it seems to me that after a year of looking … I expected (USDA) to be in a position to either say that there was misconduct or that there was not,” Johnson told reporters Wednesday. “Because if there wasn’t misconduct, I think that’s going to add even more fuel to our idea that the marketplace is broken in other ways and that Congress needs to step up and Act.”
Ethan Lane, vice president of government affairs for the National Cattlemen’s Beef Association, said NCBA is “pleased USDA has produced a report” into the industry’s market dynamics, which has remained “a central topic of conversation for NCBA, our state affiliates, and cattle producers throughout the country.”
In a statement, North American Meat Institute — which represents meatpackers — said USDA’s report “identifies no wrongdoing” and affirms “that two extreme and unforeseen events affected beef markets.” (USDA’s report said it did not examine potential violations.) Julie Anna Potts, the group’s president and CEO, also noted that it is “difficult to see how the USDA’s recommended legislative proposals would have changed the outcome of the fire or the pandemic.”
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“We will continue discussions with producer groups, Congress, and the Administration to ensure there is a fair and competitive market,” she said. “It is especially critical in these uncertain times for producers and packers to work together.”
In a release, USDA confirmed “a cooperative relationship” with DOJ’s Antitrust Division and said the two departments “have discussed allegations of anticompetitive practices in the meat packing industry.
“Should USDA find a violation of the Packers and Stockyards Act, it is authorized to report the violation to DOJ for prosecution,” USDA said.
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