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Fed Cattle Market Price Reductions Antitrust Class Action

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Beef Cattle in Field

This antitrust class action brings suit against a number of beef packers for colluding to depress the prices of fed cattle. Because the packers earn their money from the “meat margin”—the spread between the price of fed cattle and the price at which the meat is sold—the companies allegedly decided to earn more by depressing the price of the cattle. The defendants in this case include Tyson, JBS, Swift, Cargill, Marfrig, and National.

The supply of fed cattle cannot quickly change. It takes years to get cattle ready for market. They are “perishable,” because if they are not sold within a certain length of time, they become too old to sell. Also, there is no alternative use for them than as meat. Because of this, the complaint says, “the meat margin is very sensitive to changes in aggregate industry slaughter levels.” In other words, when beef packing companies are not buying and slaughtering many cattle, producers must compete by lowering prices.

The beef packers get their cattle via agreements in which a producer agrees to deliver cattle to a packer when they reach slaughter weight, but the price is determined at the time of delivery. The price is partially determined by the price of cattle in the weekly cash cattle market, a kind of spot market showing what the current price is.

The complaint says that in 2015 the beef packers colluded to lower the prices by several means. First, they “periodically reduced their slaughter volumes” to reduce demand. Second, during the same periods, they “curtailed their purchase and slaughter of cash cattle” to depress the spot price. Third, they coordinated their practices with cash cattle. Fourth, they imported foreign cattle, even at a loss, to reduce demand in the domestic market. Finally, they closed and idled some of their plants at the same time.

The reduction in fed cattle prices did not benefit consumers, the complaint says, because the meat packers did not pass on the lower prices. 

There was another result of the collusive behavior, the complaint says. The “conspiracy impacted … the market for live cattle futures and options traded on the Chicago Mercantile Exchange (CME). 

Two classes have been defined for this action. 

  • The Producer Class is all persons or entities in the US who sold directly to a defendant in this case one or more fed cattle for slaughter other than on a cost-plus basis, between January 1, 2015 and the present.
  • The Exchange Class is all persons who traded in live cattle futures or options traded on the CME or another US exchange, between January 1, 2015 and the present. 
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