Senators ask GAO to investigate cattle prices

MADISON

Responding to a request from a cattle industry group, the Senate Judiciary Committee has made a request for the Government Accountability Office (GAO) to begin an investigation into the 2015 cattle price collapse. Anyone raising and selling cattle will remember the precipitous drop in cattle prices in late 2015 for cull cows, beef cattle and dairy bull calves. After highs were reached in mid-2015, the drastic price drop seems like market manipulation to some in the industry.

The letter requesting the investigation by the Comptroller General of the United States and his agency, the GAO, came from top officials on the Senate Judiciary Committee.

The bi-partisan request was signed by the chairman and ranking member of the U.S. Senate Judiciary Committee, Senators Chuck Grassley (R-Iowa) and Patrick Leahy (D-Vt.), respectively, along with the chairman and ranking member of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights, Senators Mike Lee (R-Utah) and Amy Klobuchar (D-Minn.), respectively.

In the letter, the Senators passed on to Comptroller General Gene Dodaro their information on the dramatic price drop in cattle prices in the latter half of 2015 and how at least one cattle group brought them concerns about possible antitrust activities that could have led to the price drop.

In January R-CALF USA, a Montana-based stockman's group, brought its concerns to the committee and asked for an investigation of some kind — potentially a Senate hearing. The Senators noted that since the request came in from the cattle group, Judiciary Committee staff members have spoken to various cattle industry stakeholders about 'possible explanations' for the sudden price drop.

The four Senators noted that 'given the unique and prominent role of the fed cattle market in U.S. agriculture and the economy generally, a robust analysis of the market forces associated with this price drop is warranted.'

They noted that the 15.1 percent drop in fed cattle price in the latter half of 2015 'presents significant implications' for consumers, producers and businesses. In their request for the GAO to conduct an assessment of the cause of the price drop, they asked for the government's watchdog bureau to include 'a review of the structure of the market and of any possible anticompetitive conduct.'

'We are pleased the Judiciary Committee agrees that the evidence we provided regarding the dysfunctionality of our fed cattle market warrants a careful investigation into the current structure of our industry and our industry's susceptibility to anticompetitive practices,' said R-CALF CEO Bill Bullard.

The GAO is an independent, nonpartisan agency often called the 'government watchdog' because it investigates how the federal government spends taxpayer dollars. The Comptroller General of the United States, who heads the GAO, is appointed to a 15-year term by the President. Comptroller General Dodaro was appointed by President Barack Obama in 2010.

Bullard lamented the vertically integrated structure that has taken over the U.S. chicken industry — putting it under the complete control of large, corporate players. The GAO investigation represents 'our last best chance to stop the 'chickenization' of our cattle industry,' said Bullard.

'We don't want our cattle industry to follow the chicken industry's path,' he added, 'and the only way to reverse our present trajectory towards it is to defend and protect competition in our cattle markets.'

At the beginning of the Obama administration (in 2010) the U.S. Departments of Agriculture and Justice held joint hearings across the country for various commodity sectors, and gave the impression that they would begin rooting out anticompetitive behavior and protect market competition by enforcing antitrust laws.

However, as time wore on, no such actions have been initiated by either agency.

In the beef sector the Packers and Stockyards Act, which prohibits anticompetitive conduct, was designed to protect market competition.

The Packers and Stockyards Act was enacted after the Federal Trade Commission reported to President Woodrow Wilson that the big five meat packers were manipulating markets, controlling the price of meat and defrauding consumers and producers through their anticompetitive behavior. Congress and U.S. consumers were irate and pushed for action.

Congress passed legislation in August 1921 and it was signed immediately by President Warren Harding and went into effect a month later. The law was originally designed to regulate interstate commerce in livestock, dairy and other ag products and prohibited unfair or deceptive practices and price manipulation or the creation of a monopoly. Stockyards were forbidden from dealing in the livestock they handled.

The law has been amended many times in the intervening decades.