CHICAGO, Ill. - The Ranchers Cattlemen Legal Action Fund United Stock growers of America (R-Calf USA), along with four cattle-feeding ranchers in Iowa, Nebraska, Kansas and Wyoming have filed an historic class action lawsuit against the four biggest beef packers in the United States. Scott +Scott Attorneys at Law LLP (Scott +Scott) as well as Cafferty Clobes Meriwether & Sprengel LLP (Cafferty Clobes) are representing the plantiffs with a complaint filed against Tyson Foods, Inc., JBS S.A., Cargill, Inc., and National Beef Packing Company, LLC, and certain of their affiliates (the Big 4).
R-Calf USA CEO, Bill Bullard, stated that R-Calf was making good on its promise “to not allow the beef packers to do to the cattle industry what they’ve already done in both the chicken and the hog industries. In those two industries the meat packers have captured the entire supply chain, thereby reducing competition as well as reducing opportunities for both current operators and aspiring operators.”
R-Calf USA alleges that the Big 4 packers “violated U.S. antitrust laws, the Packers and Stockyards Act, and the Commodity Exchange Act by unlawfully depressing the prices paid to American ranchers.” The Big 4, who collectively purchase and process over 80% of the United States fed beef cattle annually have allegedly conspired to suppress beef prices from January 1, 2015 to present time. American ranchers have taken catastrophic losses during the last four years, while the Big 4 have inflated their own margins and profits.
Bullard continued “after we had exhausted all other remedies, we’ve gone to congress for years, we’ve gone to the administration, both past and present. Urging them to take steps to protect the competitiveness of our markets, but all of our requests have gone unheeded.”
A class action lawsuit occurs when a large group of people suffer an injury or financial loss due to the same company or product. The actual damage to each person is usually not worth their time or money to file individually, but when filed as a class, the suit can often be worth millions of dollars. Scott +Scott and Cafferty Clobes’ class action lawsuit seeks to recover the losses suffered by two classes believed harmed by the Big 4’s alleged conduct. The first class is the American ranchers who sold fed cattle to any of the Big 4 since January of 2015 to present. The second class is those traders who transacted live cattle futures or options contracts on the Chicago Mercantile Exchange (CME) from January 2015 to the present. According to the suit filed with the Northern District of Illinois, at the Federal District Court in Chicago; “Packing Defendants then continued to suppress the price of fed cattle through the coordinated procurement practices and periodic slaughter restraint. Packing Defendant’s conspiracy –which is confirmed by witness accounts (a former employee of one of the Big 4), trade records and economic evidence, impacted both the physical fed cattle market and the market for live cattle futures and options trade on the CME.”
Packing Defendants profitability is driven by the “meat margin,” which is the spread between the price packers pay for fed cattle, and the price they charge for beef. Fed cattle prices steadily increased between 2009 and 2014 due to a strong demand for beef after a shortage of fed cattle following the droughts of 2011 to 2013. Industry experts predicted the price of fed cattle to stabilize in 2015, after prices peaked in November of 2014. Prices were predicted to stay at relatively the same price level for several years to come.
That stabilization did not occur, instead, according to the R-Calf USA law suit, the Packing Defendants “used their market power, price sensitives, and thin cash cattle trade to their advantage and embarked up on a conspiracy to depress fed cattle prices. Their conspiracy to reduce fed cattle prices, and thereby increase the meat margin, was carried out through the following coordinated conduct: (1) Packing Defendants periodically reduced their slaughter volumes so as to reduce demand for fed cattle; (2) Packing Defendants curtailed their purchase and slaughter of cash cattle during those same periods; (3) Packing Defendants coordinated their procurement practices for cash cattle; (4) Packing Defendants imported foreign cattle at a loss so as to reduce domestic demand; and (5) Packing Defendants, simultaneously, closed and idled plants.”
After cattle prices collapsed in 2015, consumer prices of beef have remained at near record highs. It is estimated that the collapse of the cattle market in 2015 depressed the market an average of 7.9%, causing significant harm to the U.S. cattle producer.
“This is an example of the cattle producers themselves standing up to protect their industry and to recover the damages that have accrued as a result of the unlawful practices of the highly concentrated beef packers,” concluded Bill Bullard.
R-CALF USA, Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America, represents U.S. cattle producers on domestic and international trade, marketing and private property issues. R-CALF USA, a national, non-profit organization, is dedicated to ensuring the continued profitability and viability of the U.S. cattle industry. R-CALF USA’s membership consists primarily of cow-calf operators, cattle backgrounders, and feedlot owners in 47 states.