USDA: Probe Launched Over Beef Pricing After Kansas Fire
U.S. Agriculture Secretary Sonny Purdue said Wednesday his department has launched an investigation to determine whether there have been unfair beef pricing practices after the fire at the Tyson slaughterhouse in Kansas.
"As part of our continued efforts to monitor the impact of the fire at the beef processing facility in Holcomb, Kan., I have directed USDA's Packers and Stockyards Division to launch an investigation into recent beef pricing margins to determine if there is any evidence of price manipulation, collusion, restrictions of competition or other unfair practices," Perdue said in a statement.
If any unfair practices are detected, the department will take "quick enforcement action," he added.
Industry experts say the price of live cattle has fallen since the fire, while wholesale beef prices have risen. The Holcomb plant processed about 6,000 cattle a day, about 6% of all the cattle processed in the United States.
Tyson officials have said a spark from welding during maintenance is the likely cause of a fire, which caused extensive damage. No one was injured. The fire damaged a small area but affected critical operating systems. The company has said it plans to reopen the facility.
The impact on retail beef prices for consumers since the Aug. 9 fire is not yet known because those figures are only reported monthly, said Glynn Tonsor, an agricultural economics professor at Kansas State University.
In the days after the fire, fed cattle prices fell by $5 per hundredweight to about $105 per hundredweight, Tonsor said. That amounts to about $70 per head for a 1,400-pound animal.
At the same time, choice wholesale boxed beef was up $22 per hundredweight in the days following the fire. Those were the largest daily gains for wholesale meat prices on record since market reporting began in 2001, Tonsor said.
"The point is wholesale beef got more expensive and cattle got cheaper because of the event," Tonsor said.
Prices for live cattle have recovered a bit in recent days, but have not returned to their levels before the fire.
"I can't say if there was anything inappropriate occurring," Tonsor said. "I just think in general what was observed in the reported markets is consistent with supply and demand factors we anticipated."
The fire reduced the ability of the industry to kill and process cattle as normal. That came at a time when beef stocks the amount of beef in freezers was pretty low in July. Beef buyers were concerned about the low beef supplies at the same time the meat processing plant fire made it harder to produce wholesale beef, so they bid up what beef existed, Tonsor said.
"On balance, I think it is the markets were working ... the supply and demand situation led to lower cattle prices and higher beef prices," Tonsor said.
Tonsor also pointed to other factors such as the volatile stock market in the last two or three weeks which can indirectly affect cattle prices. If demand is expected to be weak, cattle are worth less, when demand is expected to be strong, cattle become worth more, he said.
At the Kansas Livestock Association, spokesman Todd Domer said its members are frustrated with what is going on in the marketplace. He said an investigation is "probably justified."
"Our members would hope that not only they can do a thorough job in that investigation, but also a fairly quick job," Domer said. "Do it expeditiously so that we don't have this hanging over the market forever or for an extended period of time."