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Investigation of market collusion expanded to include current price disparities

SD Ag Connection & News Staff - April 13, 2020

WASHINGTON, D.C. – Extreme volatility in livestock markets is raising red flags across the country, leading the American Farm Bureau to urge the Commodity Futures Trading Commission, the U.S. Department of Agriculture and the Chicago Mercantile Exchange to leave no stone unturned as they monitor and analyze market activity.

American Farm Bureau President Zippy Duvall applauded Agriculture Secretary Sonny Perdue for expanding USDA's investigation into market activity surrounding the Holcomb fire to include the volatility and disparities surrounding the COVID-19 outbreak in the United States.

It began with a fire that partially destroyed a Tyson Meats plant in Holcomb, Kan., in August 2019 where an estimated six percent of the nation’s beef processing is done. That started a chain of market price volatility and disparities, with live segments of the cattle industry suffering deep price discounts, while beef packers posted record-setting profits.

It led to a call from ranchers, livestock markets and feeders for an investigation into possible collusion and price fixing among packing businesses.  USDA’s Agriculture Secretary Sonny Perdue announced the beginning of one on August 28, 2019. By January 2020, when asked at a cattlemen’s convention when the investigation would be completed, he said, “I have no time frame [for completion].”

Now, an investigation that began eight months ago, is to be expanded to include the volatility and disparities surrounding the COVID-19 outbreak in the United States – where once again, live prices are well below break-evens and packers are posting huge margins on the plus side, while consumers are paying ever increasing prices for beef in retail meat cases.

"The level of frustration with market volatility among livestock producers has never been higher," said Duvall. "I applaud Secretary Perdue for his commitment to expand USDA's investigation. It won't bring back lost income for producers, but it will help to restore confidence in our pricing system."

Duvall has spoken with both Secretary Sonny Perdue and CFTC Chairman Heath Tarbert about the rising concern and frustration among livestock producers. Duvall followed up with a letter to Chairman Tarbert.

The letter states, "We believe an intense examination of the volatility in cash and futures markets for beef, pork and dairy is needed to determine if any market manipulations have occurred to the financial detriment of farmers and ranchers... the disparity between the farm-level prices that producers receive and wholesale prices is alarming... We cannot afford to lose confidence in the integrity of the futures market nor the price discovery efforts in cash markets, on top of the many other market disruptions and stresses farmers and ranchers are facing."

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