USDA’s Agricultural Marketing Service (AMS) yesterday released a report on its investigation into cattle market disruptions over the past year. The document examines the effects of both the Tyson plant fire in Holcomb last August and the coronavirus pandemic on the boxed beef and fed cattle markets. It is extensive in its analysis of the market conditions before, during and after each of these two black swan events, confirming extreme volatility in both the futures and cash markets and providing some narrative of the market dynamics that were at play to help explain the drastic changes in cattle and boxed beef prices.
AMS findings regarding the Tyson plant fire indicated the uncertainty surrounding when the plant would reopen and the ease at which cattle could be rerouted was responsible for a significant amount of volatility in the market. The investigation into the market dynamics during the first two months of the pandemic found economic uncertainty and sudden and dramatic changes in beef demand each played a substantial role in the market reaction.
The report does not address the ongoing investigation into potential anticompetitive practices by the Department of Justice, nor does it explore potential violations of the Packers and Stockyards Act. It does, however, include the following statement: “Findings thus far do not preclude the possibility that individual entities or groups of entities violated the Packers and Stockyards Act during the aftermath of the Tyson Holcomb fire and the COVID-19 pandemic. The investigation into potential violations under the Packers and Stockyards Act is continuing.”
The AMS report does mention several policy considerations “in light of the desire by many market participants for improved price discovery, reinvigorated competition and a more transparent relationship between the prices for live cattle and the resulting products.” One of those considerations is the potential to rearrange the Livestock Mandatory Reporting regions to reduce instances of non-reporting due to confidentiality limitations. The report also highlighted that some external stakeholders were proposing minimum thresholds of purchases through negotiated trade, but USDA cautioned that there existed “concerns with these proposals and potential unintended consequences throughout the industry, especially if regional considerations are not adequately considered.” Additionally, USDA discussed developing better risk management products and education for small and medium-sized cattle producers, improving small to very small meat processor outreach and enhancements to the Packers and Stockyards Act investigative and enforcement tools.
To read the full report, click here.