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Steve Ollerich, President, South Dakota Cattlemen's Association
Courtesy Photo
Steve Ollerich, President, South Dakota Cattlemen's Association

SD cattle organization responds to investigation into alledged price manipulation following packing plant fire

Jerry Oster, WNAX & News Staff - August 30, 2019

WASHINGTON, DC - US Ag Secretary Sonny Perdue has ordered an investigation into beef pricing margins following a fire August 9 at Tyson’s  facility in Holcomb, KS in the heart of cattle feeding country.  

Following the fire, profit margins for packers were close to $500 per head while cattle feeders were losing $55 per head.  Cash cattle trade fell $5 to $10 per cwt in the week following the fire. October live-cattle futures fell $8.50 per cwt in that time.

South Dakota Cattlemen’s Association President Steve Ollerich of Elkton, says cattle producers took a financial hit. “It was definitely a big effect,” says Ollerich. “They dropped the fat cattle market and the packer’s margins went up to record highs. It just shouldn’t be that way.  They could have found the capacity to harvest those cattle. They took advantage of the situation.”

Tyson also operates beef plants in Texas, Nebraska, Illinois and Washington state.

Going forward, the concern is that without the Tyson plant up and running, beef supplies will be tighter and cattle prices will continue to be volatile based on lower packing capacity. Continued effects on consumer demand is also a possibility as boxed beef values surge on the idea that packers would not be able to deliver enough meat to the market.  Boxed beef values rose $22.32 per cwt in choice cuts and is reflected in pricing at the retail meat case.

Ollerich says he is pleased the Ag Secretary is moving ahead with the investigation. “I’m glad they are jumping on it and trying to find out just what went on,” says Ollerich.  “It should be looked into and dealt with.  There was no reason for it, whatsoever.”

In a statement this week, Perdue said, “As part of our continued efforts to monitor the impact of the fire at the beef processing facility in Holcomb, KS., I have directed USDA’s Packers and Stockyards Division to launch an investigation into recent beef pricing margins to determine if there is any evidence of price manipulation, collusion, restrictions of competition or other unfair practices. USDA remains in close communication with plant management and other stakeholders to understand the fire’s impact to industry.”

He added, “I have spent this summer visiting with cattle ranchers across the country, and I know this is a difficult time for the industry as a whole.”

Ollerich says transparency is critical for the markets and the USDA needs to look at all aspects of the beef supply chain and utilize all internal and external expertise in the investigation.

“In any business you have to have transparency,” says Ollerich. “Especially when packers are making as much as they are.  I mean $300-$400 a head is just unbelievable especially when the ranchers and farmers sitting out here are taking a $1.05-$1.10 for their animals going to the packing plant.

The Tyson Holcomb plant processed about 6,000 head of fed cattle per day (30,000 head in a five-day work week), which amounts to 6% of total U.S. fed cattle capacity, according to the Kansas Livestock Association.

The August 9 fire caused major damage at the plant, which employs 3,500 workers. The square footage of the damaged area is small compared to the entire plant, but Tyson says the fire impacted critical operating systems.  Tyson Foods said it will rebuild on the Holcomb site. Until the plant comes back online, full-time workers will receive full pay, the company said.

Phone number: 605-347-4455
E-mail: [email protected]
Address: 1612 Junction Avenue, Suite #1
Sturgis, SD 57785