Cattle futures saw their biggest drop in 34 years at the end of 2015.
The futures market dropped 16 percent at end of last year, rivaling numbers last seen in 1981. A strong dollar limited trade and had the export market down 12 percent through November. Imports increased 20 percent bringing domestic inventories of red meat to a record high.
R-CALF USA has sent a formal request to the U.S. Senate Committee on the Judiciary to investigate the collapse in the cattle market. Concerns for the group are that antitrust and anticompetitive conduct may have occurred in the U.S. beef and cattle markets during 2015.
Iowa Sen. Chuck Grassley says if the accusations are credible the committee would have a responsibility to look into the matter.
National Cattlemen’s Beef Association officials say there is no merit in the request.
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The cover letter to the committee noted 13 specific issues raised by R-CALF with the current state of the cattle market. Here are the areas the group would like investigated:
- The cause for the dramatic, unprecedented collapse of U.S. cattle prices in 2015.
- Whether there are structural problems in the U.S. cattle market that contributed to the market collapse in 2015.
- Whether dominant meatpackers or other major market participants engaged in unlawful conduct that adversely influenced the cattle futures market and cash cattle market in 2015.
- Whether there is a connection between the 2015 market collapse and the anticipated increase in imports from Brazil and Argentina in early 2016.
- The cause for the dramatic decline in the cattle producers’ share of the consumers’ beef dollar in 2015.
- Whether the economic windfalls realized by downstream segments of the beef supply chain were achieved through market manipulation or control in 2015.
- Whether the dominant meatpackers manipulated the cattle market by directly or indirectly dividing or assigning cattle procurement territories among themselves in 2015.
- Whether the dominant meatpackers granted themselves undue preferences or advantages by strategically killing their own cattle or their contracted cattle.
- Whether the dominant meatpackers are “gaming” price reporting rules to hide more favorable prices paid to some cattle feeders but not to all.
- Whether the dominant meatpackers colluded in 2015 to achieve their synchronized shunning of the price-discovery cash market for the purpose of manipulating prices.
- Whether the USDA was complicit in shielding any manipulative practices of the dominant meatpackers from the public.
- Whether the dominant meatpackers engaged in conduct to force cattle feeders to overfeed cattle for the purpose of manipulating or controlling prices.
- Whether the dominant meatpackers used either domestic or foreign protein substitutes to manipulate or control demand for U.S. cattle in 2015.
Economists have said the dramatic price drop was simply an end to a nice run seen in 2014 that could not be sustained through 2015. The strong dollar, competition from pork and poultry, increased slaughter weights, and increased herd expansion all contributed to the down market.
Despite R-CALF's concerns, last year was still better than 2013. Choice steers were averaging only $125.89/cwt based on USDA calculations for 2013. In 2015, fat cattle brought $148.07/cwt.