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Chick-News.com Poultry Industry News, Comments and more by Simon M. Shane

USDA Reports on the Spread Between Cattle Prices and Boxed Beef

07/26/2020

The fire in the Tyson beef packing plant in Holcomb, KS on August 9th 2019 disrupted packing and impacted markets.  The plant was responsible for six percent of U.S. beef packing and in the weeks following the event, the spread between fed cattle and choice boxed beef rose to $67 per hundredweight.  This value compares with $28 per for the corresponding weeks in 2016 through 2018. 

The August fire preceded the Labor Day holiday weekend, amplifying the spread.  Future prices for fed cattle fell sharply immediately after the fire and the event also reduced the number of negotiated cash sales of fed cattle.

 

Due to the sharp decline in value of fed cattle, the Secretary of Agriculture directed the Agricultural Marketing Services to investigate market conditions, cattle prices, boxed beef values, and spreads before and after the fire and to determine whether there was any contravention of the Packers and Stockyards Act. 

 

The report also considered the similar effect of plant shutdowns and reduced throughput as a result of outbreaks of COVID-19 among workers that generated an accentuated spread between fed cattle and boxed beef prices in 2020.

 

The report evaluated policy changes that may be necessary affecting price discovery, increased competition and greater transparency in purchase of fed beef.  Adherence to the Livestock Mandatory Reporting System is considered necessary and it was recommended that the proportion of negotiated transactions should increase.  The report also suggests improvements in education and product improvement for small and medium-sized packers and enhancements to the Packers and Stockyards Act with respect to investigation and enforcement. 

 

It is understood that the USDA-AMS economists working on the report communicated  their findings to the Department of Justice Antitrust Division with special reference to possible anticompetitive practices in meat packing.


 
Copyright © 2020 Simon M. Shane