Seeking to “prevent the big four packers from capturing the U.S. cattle market from independent U.S. cattle producers,” a class action lawsuit was filed in Chicago on behalf of R-CALF USA and four cattle-feeding ranchers against America’s four largest packing companies. The suit alleges violations of U.S. antitrust laws, the Packers and Stockyards Act, and the Commodity Exchange Act by unlawfully depressing the prices paid to American ranchers.
The suit, filed Tuesday, April 23, 2019, was filed against Tyson Foods, Inc., JBS S.A., Cargill, Inc., and National Beef Packing Company, LLC, and certain of their affiliates, who collectively purchase and process over 80% of the U.S.’s fed cattle annually. R-CALF and the four ranchers are represented by Scott+Scott Attorneys at Law LLP, a national antitrust and securities litigation firm, along with Cafferty Clobes Meriwether & Sprengel LLP. The four cattle feeders are from Iowa, Nebraska, Kansas, and Wyoming.
In a statement from Scott+Scott, the suit alleges that from at least January 1, 2015 through the present, the big four packers conspired to depress the price of fed cattle they purchased from American ranchers, thereby inflating their own margins and profits.
The class action lawsuit seeks to recover the losses suffered by two classes believed harmed by the packing companies’ alleged conduct. The first class includes cattle producers who sold fed cattle to any one of the firms from January 2015 to the present. The second class consists of traders who transacted live cattle futures or options contracts on the Chicago Mercantile Exchange (“CME”) from January 2015 to the present. The complaint, which plaintiffs claim is supported by witness accounts, including a former employee of one of the packers, trade records, and economic evidence, alleges that the packers conspired to artificially depress fed cattle prices through various means, including:
- collectively reducing their slaughter volumes and purchases of cattle sold on the cash market in order to create a glut of slaughter-weight fed cattle;
- manipulating the cash cattle trade to reduce price competition amongst themselves, including by enforcing an antiquated queuing convention through threats of boycott and agreeing to conduct substantially all their weekly cash market purchases during a narrow 30-minute window on Fridays;
- transporting cattle over uneconomically long distances, including from Canada and Mexico, in order to depress U.S. fed cattle prices; and
- deliberately closing slaughter plants to ensure the underutilization of available U.S. beef packing capacity.
The plaintiffs allege these practices are estimated to have depressed fed cattle prices by an average of 7.9% since January 2015, causing significant harm to U.S. ranchers.
A statement was issued by Tyson spokesman Gary Mickelson:
"We’re disappointed this baseless case was filed. As with similar lawsuits concerning chicken and pork, there’s simply no merit to the allegations that Tyson colluded with competitors. This complaint is nothing more than another transparent and opportunistic attempt by attorneys to make money for themselves at the expense of consumers. Tyson operates with integrity every day. We welcome competition, which makes us a better company, enhances the quality of our products and provides more choices at greater value to our customers. We depend on thousands of independent cattle, pig and chicken farmers and ranchers as a vital part of our supply chain. Contrary to the assertions in this lawsuit, Tyson wants its suppliers to succeed. Tyson will vigorously defend itself and its proud heritage of supporting America’s farmers and ranchers."
R-CALF USA CEO Bill Bullard said, “We have exhausted all other remedies but now, with the expert help of Scott+Scott and Cafferty Clobes, our members’ concerns will be addressed and we hope U.S. cattle ranchers can be compensated for years of significant losses.”
“The impact of the packers’ conduct on American cattle ranchers has been catastrophic,” said David Scott, managing partner, Scott+Scott. “The health and integrity of the American cattle industry is being permanently and irrevocably damaged, independent ranchers are systematically being driven out of business, and consumers are losing the ability to buy high-quality American beef with confidence.”
“The packers’ alleged conduct has had a direct and significant impact on the commodities underlying CME live cattle futures and options contracts,” said Anthony Fata, partner, Cafferty Clobes. “It is imperative for investors to maintain confidence in this vital financial market, relied upon by ranchers, traders and others to manage the risks associated with their businesses.”