E-mail this article to
yourself or a friend.
Enter address:


Cattle farmers win $1.28 billion in beef suit

(Wednesday, Feb. 18, 2004 -- CropChoice news) -- Margaret Webb Pressler, Washington Post:

A federal jury in Alabama awarded $1.28 billion to cattle farmers yesterday, deciding that a beef-processing giant used its dominance of the $70 billion beef industry to manipulate prices for cattle on the open market.

Tyson Foods Inc. said it intends to appeal the verdict in the case filed against IBP Inc., which Tyson now owns. Another piece of the case -- involving a possible injunction against certain cattle-buying practices -- has yet to be decided by the judge involved.

But the jury's decision could be a first step toward reversing the kind of power big businesses have gained as consolidation has swept through the cattle and beef industries over the past two decades.

"I think, for the largest packers, Maalox is going to be the drink of choice tonight, and the for the rest of us it's going to be Jim Beam," said Kathleen Kelley, a Colorado rancher and president of R-Calf USA, a trade organization representing independent cattle farmers. Kelley testified against Tyson at the trial.

The case offers a glimpse into an industry that increasingly pits smaller cattle operations against bigger, more corporate ranches and the few, powerful packing companies. The top four beef processors in the country have about 80 percent market share. Tyson is the largest.

Tyson, in a statement, called the verdict "a disappointment to our company and thousands of cattle producers who want to maintain the right to market cattle the way they want." It also called the case a "temporary legal setback" that would not materially affect the company's finances or operations. The class-action suit was filed in 1996 against IBP, which Tyson bought in 2001.

At issue in the case are the kinds of long-term contracts that Tyson and other beef packers are using more frequently to purchase live cattle. The contracts allow Tyson to order cattle to be delivered at a future date, to be paid for upon delivery. As in other commodity markets, such long-term agreements smooth out price fluctuations for processors and give the producers a predictable stream of income.

But plaintiffs in the case argued that Tyson used long-term contracts for days or weeks at a time, staying out of the open market. The long stretches of inactivity by the industry's biggest buyer would cause the price of cattle to fall, sometimes precipitously, plaintiffs argued, at which point the company would buy again, benefiting from the lower prices.

"An inactive market involving a significantly reduced number of sales always yields lower prices, whether you're selling a perishable commodity or your house," said David A. Domina, attorney for the plaintiffs.

The jury found that such practices violated the Packers and Stockyards Act of 1921, which forbids meatpackers from depressing prices, intentionally or not. It calculated that the 30,000 cattle producers who sold cattle to IBP between February 1994 and October 2002 lost about $1.28 billion because of the company's actions.

The judge in the case also has yet to decide whether to impose an injunction on meat processors that would limit their ability to buy cattle on contract.

Wall Street reacted with surprise at the judgment initially, pushing Tyson's stock down more than $1 in midday trading, but the company's shares recovered to close down just 17 cents, at $16.21. The full impact of the case will not be known for some time.

"The first thing it creates is just a lot of unknowns," said Clement E. Ward, a professor of agricultural economics at Oklahoma State University.

From a news release:

CONTACT: Mabel Dobbs, WORC Livestock Team Chair, 208-549-3433 (Residence);
John Smillie, WORC staff, 406-252-9672

A jury in Montgomery, Alabama today found that IBP, the nation’s largest beefpacker, had used illegal cattle contracts to manipulate cattle prices and cost U.S. cattle producers $1.28 billion.

Mabel Dobbs, a rancher from Weiser, Idaho and Chair of WORC’s Livestock Committee, issued the following statement on behalf of WORC.

“Family farmers and ranchers across America celebrate today’s verdict. Every cattle producer in this country owes a great debt to the cattlemen who filed this case and saw it through the last eight years, and to the attorneys who presented this complicated issue to the jury. We also owe thanks to the jury who listened to the testimony about IBP’s market manipulation and said today, ‘this is just not right.’

“The jury’s verdict today is a vindication of WORC’s efforts over the last ten years. For ten years we have said that IBP and other packers use these secret deals, called captive supplies, to manipulate markets, and that they violate the Packers and Stockyards Act. We proposed a common sense solution to this problem to the United States Department of Agriculture the same year this case was filed. USDA has never acted on that proposal, because the agency did not believe the packers’ use of captive supplies violated the law. Today, the jury agreed with us.”

“The verdict adds urgency to Congressional efforts to restore competition in the cattle markets. We urge members of Congress to pay attention to this verdict, and to support Senator Mike Enzi’s Captive Supply Reform Act.”


WORC is a network of grassroots organizations from seven states that include 8,250 members and 48 local community groups. WORC helps its members succeed by providing training and by coordinating regional issue campaigns. WORC represents farmers and ranchers in Wyoming , Montana , South Dakota , North Dakota , Colorado , Idaho , and Oregon .