Conaway Tells AgriTalk Packer Probe Likely
Iowa Senator Charles Grassley is among some farm state senators who are calling for investigations of beef packing companies following the surge in wholesale beef prices that led to extreme processing profit margins. Texas Congressman Mike Conaway told AgriTalk Tuesday he thinks a probe into packer profits is likely.
Cattlemen have complained that surging meat prices due to the COVID-19 crisis hoarding did not translate into higher cattle prices. During the crisis, CME futures prices plunged lower along with the stock market, but wholesale beef prices rose 22% to a peak near $257 per cwt.
The combination of peak wholesale prices and lower cash cattle prices saw estimated packer margins at $510 per head the week ending March 20, and climbing to $555 per head the week ending March 27, according to the Sterling Beef Profit Tracker.
Senator Grassley wrote on Twitter that U.S. Department of Agriculture, Department of Justice and Commodity Futures Trading Commission probes may be needed to determine why ranchers did not benefit from soaring meat demand.
"Beef is flying off grocery shelves but farmers are seeing prices go down," Grassley said. "If packers are illegally manipulating markets during crisis, we need USDA & DOJ & CFTC to investigate + help farmers. Four companies control 80% of market & they're taking advantage."
Four U.S. Senators from South Dakota, North Dakota and Montana sent a letter to the Justice Department calling for a price-fixing investigation, according to a Reuters report.
In an AgriTalk interview with host Chip Flory on Tuesday, Conaway, representing Texas’ 11th district, said he believes there will be an investigation.
“We've got a regulatory scheme in place that is constantly looking for this issue,” Conaway said. “Some of this disruption is generally new. I mean, Americans got 54% of their food through restaurants before this event. And now that has switched. Grocery stores are buying more meat and restaurants are buying less meat. How the distribution system reacts to that, in the short-term, maybe part of what’s going on.”
Reuters reported Cargill said it is a committed buyer in the cash market for cattle, and Tyson said it wants cattle producers to succeed and paid them a premium last week.
"This is an uncertain and unprecedented time, where food service beef demand has come to an immediate and virtual standstill, while retail demand has increased," Tyson told Reuters.
Congressman Conaway told AgriTalk, “My guess is that when the smoke clears, there will be another investigation. But, right now there’s not much we can do that's going to satisfy anybody in the short-term. What we need to make sure of is that cattlemen are growing cattle and the processors are still processing meat and getting it to the grocery store so we can feed America while we fight this fight against coronavirus.”
Last summer, USDA launched an investigation of potential price manipulation in the wake of the fire at Tyson's Holcomb, Kans. processing facility. That investigation is still under review.
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