Price-fixing suit filed against JBS, other meat packers

GREELEY — The Ranchers-Cattlemen Action Legal Fund, commonly known as R-CALF USA, has filed a federal class-action lawsuit accusing Brazil-based JBS S.A. and other major meatpacking firms of intentionally driving down the prices ranchers are paid for their cattle.

The suit was filed in U.S. District Court in Chicago against JBS — including Greeley-based JBS USA — Tyson Foods Inc., Cargill Inc. and National Beef Packing Co. LLC. Together, the meatpacking giants are often referred to as the “Big 4.”

According to the suit, affiliates of the Big 4 began suppressing the price of fed cattle — animals sold to packing companies for slaughter — since 2015 or earlier.

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JBS representatives did not immediately respond to requests for comment Tuesday.

“Packing Defendants’ coordinated conduct, including slashing their respective slaughter volumes and curtailing their purchases of fed cattle in the cash cattle market, precipitated an unprecedented collapse in fed cattle prices in 2015,” the class-action complaint alleges. “Packing Defendants then continued to suppress the price of fed cattle through coordinated procurement practices and periodic slaughter restraint.”

Citing confirmation from “witness accounts, trade records, and economic evidence,” R-CALF attorneys with Scott+Scott Attorneys at Law LLP allege a price-suppression conspiracy by the Big 4, which account for about 80 percent of the cattle purchases made in the United States, “impacted both the physical fed cattle market and the market for live cattle futures and options traded on the [Chicago Mercantile Exchange]”

The suit identifies two distinct classes who are party to the suit: cattle producers who sold fed cattle to any one of the Big 4 between Jan. 1, 2015, and the present, and traders who transacted live cattle futures or options contracts on the CME during the same period.

“The impact of the packers’ conduct on American cattle ranchers has been catastrophic,” Scott+Scott managing partner David Scott said in a prepared statement released after the suit was filed last week. “The health and integrity of the American cattle industry is being permanently and irrevocably damaged, independent ranchers are systematically being driven out of business, and consumers are losing the ability to buy high-quality American beef with confidence.”

According to the complaint: “Packing Defendants’ profitability is driven by the ‘meat margin,’ which is the spread between the price packers pay for fed cattle and the price they charge for beef. As the supply of fed cattle is insensitive to short-term changes of price – owing to the long life cycle of fed cattle, their perishable nature, and their lack of any alternative use – and as beef demand is relatively insensitive to changes in price, the meat margin is very sensitive to changes in aggregate industry slaughter levels. Consequently, Packing Defendants can increase the meat margin, and thus their profitability, by working cooperatively to reduce their respective slaughter volumes, thereby depressing the price of fed cattle.”

Ways in which the Big 4 kept cattle prices artificially low included importing foreign cattle at a loss, periodically reducing slaughter volume to slash demand, and deliberately and simultaneously closing slaughterhouses to intentionally underutilize meat packing capacity, the suit alleges.

The result, according to R-CALF lawyers, has been the artificial depression of cattle prices by an average of 7.9 percent since 2015.

By conspiring to keep prices artificially low, the Big 4 violated U.S. antitrust laws, the Packers and Stockyards Act, and the Commodity Exchange Act, according to the complaint.

“R-CALF USA is taking this historic action to fulfill its promise to its members to prevent the Big 4 packers from capturing the U.S. cattle market from independent U.S. cattle producers,” R-CALF USA CEO Bill Bullard said in a prepared statement.

The suit demands the payment unspecified damages and restitution.

As of Tuesday, the defendants had yet to respond to R-CALF’s complaint.