R-CALF USA Files Formal Complaint Regarding Multi-Agency InvestigationsTue, 08 Nov 2011 17:12:09 CST
R-CALF United Stockgrowers of America issued the following press release regarding the cash cattle marketplace and the cattle futures market. The following is their statement.
"Today, R-CALF USA filed a formal complaint seeking multi-agency investigations from the U.S. Department of Justice, the U.S. Department of Agriculture (USDA ) Grain Inspection, Packers and Stockyards Administration (GIPSA), and the Commodity Futures Trading Commission (CFTC). The complaint alleges that corporate meatpackers unlawfully manipulated either or both the cash cattle market and the cattle futures market. R-CALF USA believes the corporate packers began manipulating the market on the eve of Secretary Vilsack's announcement that he was surrendering to the corporate packers' demands to withdraw the GIPSA rule so as not to interfere with their unfair, abusive and anticompetitive cattle buying practices.
R-CALF USA estimates the alleged market manipulation caused untold numbers of U.S. ranchers-feeders to lose up to $61 per head on the livestock they sold, for a total loss to ranchers-feeders ranging from $243,800 to $434,240 during just one day's trading.
On Friday, Oct. 28, 2011, Agriculture Secretary Tom Vilsack officially announced he was surrendering key provisions contained in his agency's GIPSA rule. Those key provisions were designed to end several widely known anticompetitive practices in livestock markets that for years have disadvantaged U.S. livestock farmers and ranchers. Not surprising, those key provisions, including prohibitions on packer-to-packer sales and on multiple packers sharing a single cattle buyer, as well as a new record-keeping requirement, were vehemently opposed by corporate meatpackers, whose unfair financial advantage in the market could only be preserved if the status quo were maintained.
Not only did Secretary Vilsack accommodate the corporate packers' demands that the U.S. Department of Agriculture (USDA) take no action to interfere with their anticompetitive buying practices, but also, Secretary Vilsack further capitulated to the corporate packers' demands to refrain from finalizing other critical provision in the GIPSA rule that would have prevented packers from exacting financial harm on individual cattle feeders with ongoing impunity and from granting undue preferences and advantages to their allied cattle feeding operations, while denying such preferences and advantages to all other cattle feeders.
USDA has announced that it intends to start the protracted GIPSA rulemaking process all over again by issuing yet another proposed GIPSA rule sometime in the future.
"Secretary Vilsack surrendered to all the corporate packers' demands, thereby rendering his enforcement agency GIPSA impotent in its efforts to prevent corporate packers from engaging in unfair, deceptive and anticompetitive practices that already are forcing independent cattle feeders out of business," said R-CALF USA CEO Bill Bullard adding, "And, on Friday evening, the corporate packers rejoiced by pummeling untold numbers of U.S. cattle feeders who, by choosing to continue marketing their cattle in the open cash market, are the vanguards of the cattle industry's price discovery market."
Bullard explained that packers use the ever thinning open cash market to discover the price of cattle on a daily basis and the price discovered in the cash market is then used to establish a base price for virtually all other cattle sold under marketing agreements, forward contracts, formula contracts, as well as for cattle sold on the value added grid where cattle feeders can earn quality-based premiums.
"Those few remaining cattle feeders who market into the cash market are the vanguards of the price discovery market because it is their cattle that establishes the base price for everyone else's cattle," Bullard said.
"Our marketing committee witnessed an unexplained, sharp decline in cash cattle prices from Friday, October 28 through Tuesday morning, November 1. This decline occurred when wholesale beef prices were increasing. Early on Tuesday morning, the corporate packers, who rarely buy cash cattle early in the week due to their tremendous control over the market, initiated a buying spree and purchased 92,000 cattle at the severely depressed price. No sooner had the corporate packers ceased buying when the cattle futures market unexplainably jumped the limit up, and the temporarily depressed cash cattle market immediately recovered.
"We're requesting the three agencies to initiate comprehensive investigations into the corporate packers' role in this unexplained market disruption and we believe the facts show this was a strategic ploy by the corporate packers' to manipulate the cattle market and harm independent ranchers-feeders, many of whom continue to market high quality cattle in the cash market.
"From the corporate packer's perspective, our members' high-quality cattle that continue to be sold in the cash market is driving up the price of all the cattle procured by the packers because it is our members' high-quality cattle that is establishing the base price for all other cattle.
"The corporate packers want nothing less than to drive these ranchers-feeders who sell high-quality cattle in the cash market out of business, and the Secretary of Agriculture is helping them do it," concluded Bullard."
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