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Under siege: the U.S. live cattle industry.

ii. Foreign Product Substitutes

As confirmed by the United States International Trade Commission ("USITC"), the U.S. cattle market is highly sensitive to even slight changes in cattle supplies. The USITC found that the farm level elasticity of demand for slaughter cattle is such that "each 1 percent increase in fed cattle numbers would be expected to decrease fed cattle prices by 2 percent." (129) Researchers at the University of Nebraska-Lincoln found that fed cattle prices were even more susceptible to supply changes and stated that a 1% increase in fed cattle supplies would be expected to reduce fed cattle prices by up to 2.5%. (130) Because of this extreme price sensitivity to increased supplies, domestic cattle prices are susceptible to manipulation from the meatpackers' strategic importation of live cattle from foreign sources, which are substitute products that compete directly with domestic cattle for the meatpacker's weekly available shackle space.

Recent experience shows that nominal U.S. fed cattle prices jumped to the highest level in the industry's history within just five months after the importation of live cattle into the U.S. from Canada ceased. The importation was temporarily curtailed due to the discovery of bovine spongiform encephalopathy ("BSE") in the Canadian herd. As shown in Chart 3, the price for domestic cattle increased a remarkable $26 per cwt between May 2003, the month when Canadian cattle imports were curtailed, and October 2003, just five months later. This domestic price increase occurred even after beef imports from Canada were resumed in August 2003. This price increase represents an unprecedented per head increase of $325 for an average Nebraska Direct Choice steer weighing 1,250 pounds.

Apparently, the USDA does not have the modeling capability to evaluate accurately the price impact on the U.S. cattle industry caused by the meatpackers' strategic timing of live cattle imports. When the USDA issued its 2005 final rule to allow the resumption of imports of Canadian cattle younger than 30 months of age into the United States, it projected the largest decline in U.S. fed cattle prices would occur in the first or second quarter of the year following such resumption. The USDA estimated price declines during the first and second quarter ranging from a low of $3.10 per cwt to a high of $6.05 per cwt. (131) However, during the third and fourth quarters following the resumption of Canadian cattle imports, U.S. fed cattle prices fell from $96.50 per cwt in December 2005 to $79.10 per cwt in May 2006, a dramatic decline of $17.40 per cwt--nearly three times greater than what the USDA projected for the upper boundary of expected losses. (132)

These wild and dramatic price swings coinciding with the curtailment and resumption of live cattle imports suggest that imported cattle have a much more severe impact on domestic cattle prices than currently estimated by the USDA or any other contemporary cattle industry analyst. Moreover, imported cattle appear to defy the transportation constraints that researchers found to limit shipments of fed cattle when distances to the slaughter plant exceeded approximately 300 miles. (133) Based on information and belief, fed cattle from Canada's Alberta Province are frequently transported in excess of 600 miles to be slaughtered in Greeley, Colorado. United States meatpackers may well be slaughtering these imported cattle at a considerable financial loss in order to satisfy their weekly demands for live cattle, thereby enabling them to avoid bidding more aggressively for domestic cattle. If this is, in fact, occurring, then meatpackers are likely more than making up their losses from the procurement of the relatively few imported cattle by generating greater savings from holding prices below what a competitive market would otherwise dictate for the much greater volume of domestic cattle. An investigation is sorely needed to assess more fully the impacts on domestic cattle prices arising from the meatpackers' procurement practices for imported cattle.

C. CAPTIVE SUPPLY MANIPULATION

In June 2009, R-CALF USA filed a formal complaint with GIPSA alleging that meatpackers were aggressively engaged in at least a dozen anticompetitive buying practices that were facilitated, at least in part, by their manipulation of captive supplies. (134) The complaint alleged that meatpackers were harming domestic cattle feeders by: (1) giving preferences to Canadian cattle imports; (2) bypassing slaughter-ready cattle owned by independent cattle feeders in favor of procuring cattle from further distances; (3) providing direct, unreported premiums to larger feedlots in the form of secret sweetheart deals; (4) circumventing price-reporting requirements; (5) dividing-up territories and honoring the unwritten code that whichever packer bids first on an open pen of cattle shall not be outbid by another packer operating in the same territory; and (6) providing certain market information only to their preferred cattle suppliers. 135

In July 2009, GIPSA responded to R-CALF USA's complaint and indicated an investigation would proceed into the allegations of anticompetitive practices. (136) As part of that investigation, affidavits were taken from this author, certain cattle feeders, and other persons knowledgeable about meatpacker buying practices. In the affidavit provided by this author, additional allegations stated meatpackers were:

i. imposing disparate discounts for similar quality specifications;

ii. subdividing the cattle market by denying access to the market for certain subclasses of cattle;

iii. coercing producers to waive their rights under the Packers and Stockyards Act ("PSA");

iv. bidding not to buy cattle, i.e., offering a low bid with no intention to buy, but rather, with the intent to lower prices for live cattle;

v. offering preferential agreements with captive suppliers for prices and terms not available to other sellers of comparable cattle;

vi. entering into strategic alliances that contain special agreements for preferential access to the market and/or special prices; and,

vii. exercising undue influence over national commodities markets, potentially eliminating this hedging tool for U.S. cattle producers. (137)

Based on information and belief, the investigation into meatpacker buying practices initiated by GIPSA in 2009 was completed in 2012 and is undergoing an internal agency clearance process at the time of this paper's publication. (138) Based also on information and belief, the investigative GIPSA report is purported to be 1,382 pages in length and titled, "The Effects of Packers' Usage of Committed Supply." Pending GIPSA's issuance of this long anticipated and presumptively comprehensive expose on meatpacker buying practices, observable anecdotal and empirical market information can be used to demonstrate that meatpackers are exploiting the ever-thinning cash market with their ever-growing volumes of captive supplies.

In its official National Feeder & Stocker Cattle Summary report for the two weeks ending July 13, 2012, the USDA issued a dire warning to the U.S. cattle industry regarding the meatpackers' increased use of captive supplies. The report stated:

   The fed cattle cash market lost [$]2.00 this past week to [$]115.00
   with negotiated [cash] sales now routinely making up less than 20
   percent of the weekly slaughter. Over 60 percent of the weekly
   movement is formula-priced off the scant cash trade that is more
   like a dictatorship than a democracy. Soon, cattle feeders may be
   forced to ship their cattle with only a ballpark idea of what their
   check will look like--similar to the sheep industry. (139)


As a presumptive example of how public market information is suppressed by the politically powerful, captive-supply wielding meatpackers, and how even the USDA appears complicit in withholding relevant market information to the cattle industry, the above referenced report was scrubbed of the above quoted information by the USDA after the original report had been publicly issued and subsequently published by the agricultural trade press. (140)

A classic example of how the meatpackers deploy their captive supplies to engage in coordinated conduct to drive down fed cattle prices surfaced in 2006 when the U.S. cattle industry witnessed a coordinated withdrawal from the cash cattle market by the major meatpackers. In early February 2006, all four major beef packers--Tyson, Cargill, Swift (now JBS), and National--withdrew from the cash cattle market for longer than two weeks. (141) A market analyst wrote that cash cattle trade in the Central and Southern Plains during the period was "very light to non-existent" and that packers reportedly were "leaning on committed supplies [captive supplies] to keep the plants operating at full capacity" and were "cut[ting] slaughter rates to control inventories." (142) Another analyst reported that the reduction in slaughter rates indicated "'the determination by beef packers to regain control of their portion of the beef price pipeline.'" (143) One of the analysts stated that the packers were determined to lower cattle prices and their "determination to buy [cattle] for less is evident." (144)

Indeed, the effect of the beef packers' coordinated action is manifest. The major beef packers adroitly reduced demand for live cattle by reducing slaughter rates rather than entering the cash market. Cattle slaughter fell from 608,500 head of cattle during the last week in January 2006 to only 545,000 during the week ending February 17, 2006, which also was down significantly from the 571,000 cattle slaughtered during the same time the previous year. (145) And, in Dodge City, Kansas, fed steer prices that were $94.83 per cwt during the last week in January 2006, cowed to the meatpacker-induced reduction in the demand for live cattle and fell to $89.03 per cwt during the week ending February 17, 2006, representing a loss to independent cattle feeders of $5.80 per cwt, or $72.50 per head for every 1,250 lb. steer sold. (146)

Thus, the major beef packers acted in a coordinated manner to reduce output, and they used their captive supplies to enable them to shun the cash market for an extended period of time, which effectively harmed independent cattle producers by driving fed cattle prices lower. Not only did this coordinated action drive cattle prices lower, but it also precluded independent cattle feeders from securing timely access to the market for their cattle. Apparently, none of the major beef packers would "break ranks" to purchase at higher prices than the other beef packers. No buyer did so until prices began to fall. In fact, beef packers were willing to cut production rather than break ranks and purchase on the cash market. Clearly, the beef packers' strategy was to drive prices downward, and their purchases did not resume until prices began to fall.

The coordinated action in February 2006 was not isolated and was soon followed by a second, coordinated action. During the week that ended October 13, 2006, three of the nation's four largest beef packers--Tyson, Swift, and National--announced simultaneously that they would all reduce cattle slaughter, with some citing, among other things, high cattle prices and tight cattle supplies as the reason for their cutback. (147) During that week, the packers reportedly slaughtered an estimated 10,000 fewer cattle than the previous week, but 16,000 more cattle than they did the year before. (148) Fed cattle prices still fell between $2 to $3/cwt and feeder prices fell between $3 to $10/cwt. (149) By Friday of the next week, October 20, 2006, the beef packers reportedly slaughtered 14,000 more cattle than they did the week before and 18,000 more cattle than the year before, indicating they did not cut back slaughter like they said they would. (150) Nevertheless, live cattle prices kept falling, with fed cattle prices down another $1 to $2 per cwt and feeder cattle prices were down another $4 to $8 per cwt. (151)

The anticompetitive behavior exhibited by the beef packers' coordinated market actions caused severe reductions to U.S. live cattle prices on at least two occasions in 2006. This demonstrates that the exercise of market power is already manifested in the U.S. cattle industry.

Another aspect of captive supplies that warrants antitrust scrutiny is the beef packers' practice of accumulating captive supplies, particularly through cattle ownership and feeding, which enable them to perform two conflicting marketplace roles. In addition to being on both sides of the weekly fed cattle cash market as previously discussed, (152) the beef packer competes with independent cattle feeders in the feeder cattle market for lighter-weight cattle to place on feed. The beef packer then becomes the independent cattle feeders' buyer after the cattle are finished by the feeder, and the prior competitor may be the independent cattle feeders only fed cattle buyer.

The antitrust concern is that meatpackers who compete as buyers in both the feeder cattle market and fed cattle market are strategically positioned to drive independent cattle feeders out of business. This can be accomplished by beef packers knowingly overbidding for feeder cattle, forcing smaller feeders to pay higher than competitive prices in order to fill their feedlots. Though both the packer and the smaller feeder would suffer financial losses as a result of such action, the long-term effect would be the exodus of smaller feeders from the industry, leaving the packer-feeder with even greater buying power in the feeder cattle market. Moreover, when the packer-feeder's higher priced feeder calves are ready for slaughter, the packer-feeder can use these captive supply cattle to avoid purchasing fed cattle in the final cattle market. The effect would be to further depress fed cattle prices, which likely would enable the beef packer to recoup any losses resulting from the purchase of higher-priced feeder cattle. Though this type of predatory purchasing would benefit feeder cattle sellers in the short term, the long-term results would be disastrous as the feeding sector would become even more concentrated and both the final cattle market and the feeder cattle market would become even less competitive.

III. HARM TO COMPETITION

The beef packers and their allied trade associations have long justified their ongoing attempts to capture the live cattle supply chain with claims of increased efficiencies through economies of scale. They rationalize the adverse consequences of their actions (e.g., the exodus of industry participants and the dwindling cow herd) with claims of increased productivity and benefits to consumers that, they say, negate the need for the industry's previous numbers of either cattle producers or cattle. For example, in written testimony before the July 16, 2002 United States Senate Agriculture Committee hearing on packer ownership of livestock, the meatpacking industry's trade association, the American Meat Institute testified: "Demand for consistent quality product has led many firms to exert greater control over the supply chain." Also, in its written testimony before the same July 16, 2002 Senate hearing, the NCBA attached the executive summary of the Sparks Study, which it commissioned, to its testimony. Specifically, the Sparks Study states, "Packers use ownership of livestock to help control unit costs in a variety of ways. If this management tool is restricted, unit costs can be expected to increase (without increasing the value of the final product)." (153)

The Sparks Study asserts that direct ownership of livestock limits the packers' market risk, arguing that the futures market is insufficient for this purpose. Therefore, according to the Sparks Study, one of the few tools available to packers to offset the smaller margins associated with higher livestock prices is through direct ownership of raw production materials, like livestock, which enables them to reduce their margin risk. The Sparks Study states, "The pressures to reduce costs force the search for low-cost livestock supplies (often at the expense of producer returns)...." (154)

The Sparks Study adds additional insight into the packing industry's rational for supporting packer ownership of livestock as well as other means that contribute to vertical integration of their industry, acknowledging:

   For many meat packers, integration between the packing and feeding
   stages of livestock production is seen as an effective vehicle to
   reduce market risk exposure and loss of such a valuable tool
   increases their costs....

   Vertical integration often attracts investors because of the
   negative correlation between profit margins at the packing stage
   and the feeding stage. (155)


The foregoing discussions in Parts I and II above demonstrate that beef packers enjoy an unfair, unjust, and disproportionate pricing advantage over independent cattle feeders; and, this pricing advantage is disrupting the competitiveness of the U.S. cattle industry. Independent cattle feeders have an inherent disadvantage when beef packers participate as buyers in both the feeder cattle market and the fed cattle market. The beef packers that bid against the independent cattle feeder for the purchase of feeder cattle likely will be the only beef packers to offer a bid later to purchase those same feeder cattle after they are fed and offered for sale in the fed cattle market. The independent cattle feeder must compete against the same beef packers in the feeder cattle market as they will later sell to in the fed cattle market.

The overall impact of the unfair, unjust, and disproportionate pricing advantage enjoyed by dominant beef packers is that competition in the U.S. cattle market has been harmed and, consequently, the U.S. cattle market is now severely broken. Evidence of the severely broken U.S. cattle market, in the form of identifiable and measurable market failures, includes:

A. THE CATTLE PRODUCERS' LOST SHARE OF THE CONSUMERS' BEEF DOLLAR IS EVIDENCE OF MARKET FMLURE

In 1980, U.S. cattle farmers and ranchers who sold cattle in the fed cattle market received 63% of each dollar paid by consumers for retail beef cuts derived from a "standard animal, cut up in a standard way at the packing plant, and sold in standard form through the retail store." (156) This percentage is referred to as the producers' share of the consumers' beef dollar. As shown in

Chart 4 below, by 2009, the producers' share of the consumers' beef dollar had fallen to 43%, a full 20% decline since 1980. It was not until after 2009, when U.S. cattle inventories had fallen to historical lows, did the producers' share of the consumers' beef dollar begin to return to levels not seen since the early 1990s.

These price-spread data calculated by the USDA Economic Research Service ("ERS") are not influenced by an increase in value-added beef products. (157) The ERS emphatically states, Analysts who cite increasing value-added as a factor in pork and beef price spreads misunderstand how these are calculated." (158) Thus, the producers' lost share of the consumers' beef dollar indicates that someone in the beef supply chain is capturing the cattle producers' competitive market share of the value of retail beef. This is evidence of severe market failure caused by abusive monopsony power.

B. THE EVER-INCREASING BEEF PRICE SPREAD BETWEEN THE RANCH GATE AND RETAIL COUNTER IS EVIDENCE OF MARKET FAILURE

In addition to the clarification that its price spread data is not influenced by increased value-added beef products, the ERS further states that its price spread data can be used to "measure the efficiency and equity of the food marketing system[,]" (159) and "[i]ncreasing price spreads can both inflate retail prices and deflate farm price." (160) The price spreads between ranch gate prices, including fed cattle prices, and retail prices, including consumer paid prices, have been steadily increasing over time. (161) According to ERS, "[h]igher price spreads translate into lower prices for livestock." (162) Also, innovative technologies can reduce price spreads, and when price spreads drop, economic efficiency increases. (163) Lastly, "[b]oth consumers and farmers can gain if the food marketing system becomes more efficient and price spreads drop." (164)

Both consumers and producers are being harmed by the current system that increases price spreads, which means it is costing more than ever before to bring the raw product (i.e., cattle) to the consumer in the form of edible beef. This indicates the marketplace is becoming increasingly inefficient. The USDA found in 2004 that "the total price spreads show a weak upward trend when corrected for inflation." (165) This upward trend has only worsened since 2004. The ever-increasing price spread between ranch gate values for cattle and retail prices for beef is evidence of market failure caused by the exercise of market power that is exploiting both consumers and producers.

C. LONG-RUN LOSSES IN THE FINAL CATTLE MARKET WHILE RETAIL BEEF PRICES CONTINUALLY REACH NEW RECORD-HIGH LEVELS IS EVIDENCE OF MARKET FAILURE

According to the USDA's High Plains Cattle Feeding Simulator, U.S. cattle feeders have suffered prolonged and horrendous losses that reached as high as $25.52 per cwt in July 2012.166 Based on a typical fed steer weight of 1,250 pounds, this translates into a loss per steer of $319.00. Ironically, the USDA data show that retail values of choice beef increased from $4.75 per pound to $5.24 per pound during the period from March 2011 through Jan 2013,167 the same period depicted below in Chart 6 that shows the horrendous losses suffered by cattle feeders.

These persistent losses likely have forced thousands, if not tens of thousands, more farmer-feeders to exit the feeding industry since early 2011. The smaller farmer-feeders are less likely to have the deep pockets that their larger, corporate feedlot counterparts have to withstand such persistent and severe losses. These horrendous losses to cattle feeders while consumers continue to pay at or near record prices for beef are evidence of market failure caused by abusive monopsony power.

D. THE DISRUPTION OF THE U.S. CATTLE CYCLE IS EVIDENCE OF MARKET FAILURE

The General Accounting Office explains that the U.S. cattle industry is subject to a historical cycle, which "refers to increases and decreases in herd size over time and is determined by expected cattle prices and the time needed to breed, birth, and raise cattle to market weight,...., (168) These factors are complicated by the fact that "[c]attle have the longest biological cycle of all meat animals." (169) The cattle cycle historically occurred every 10 to 12 years, a function of the long biological cycle for cattle. The USDA reports that during the cycle, cattle numbers expand for about 6 to 7 years, consolidate for 1 to 2 years, and then decline for 3 to 4 years before the next expansion begins again. (170) In 2002, the USDA acknowledged, "The last cattle cycle was 9 years in duration; the present cycle is in its thirteenth year, with two more liquidation years likely." 171)

Given its historical responsiveness to the competitive forces of supply and demand, the cattle cycle is the bellwether indicator of the competitiveness of the U.S. cattle industry. As shown in Chart 7, the last normal liquidation phase of the U.S. cattle cycle began in 1975 and ended in 1979, lasting the typical four years. The next liquidation phase began in 1982 and ended in 1990, lasting an unprecedented eight years. The liquidation phase that began in 1996 is ongoing today and has lasted an unprecedented 16 years, though it unsuccessfully tried to recover from 2005 to 2007 in response to the anomalous curtailment of Canadian cattle imports. In late 2007, the USDA began cautioning the industry, stating that "[s]ome analysts suggest the cattle cycle has gone the way of the hog and dairy cow cycles." (172)

The historical cattle cycle is now disrupted, and the obvious trend since 1975 is an ever-shrinking cattle herd. The competition-induced demand/supply signals that once led to expectations about changes in cattle prices are no longer functioning properly. While cattle industry analysts ponder this phenomenon, in February 2008, the USDA attributed a similar disruption that was occurring in the U.S. hog cycle to the hog industry's new structure. (173) The USDA declared that the "New Hog Industry Structure Makes Hog Cycle Changes Difficult To Gauge," and stated, "The structure of the U.S. hog production industry has changed dramatically in the past 25 years." (174) This "dramatically" changed structure includes the consolidation of the industry, where "fewer and larger operations account for an increasing share of total output." (175)

As was the case in the hog industry, the USDA recognized a functioning cattle cycle itself as an indicator of a competitive market. The USDA succinctly explained:

   The cattle cycle refers to cyclical increases and decreases in the
   cattle herd over time that arise because biological constraints
   prevent producers from instantly responding to price. In general,
   the cattle cycle is determined by the combined effects of cattle
   prices; the time needed to breed, birth, and raise cattle to market
   weight, and climatic conditions. If prices are expected to be high,
   producers slowly build up their herd sizes; if prices are expected
   to be low, producers reducers their herds. (176)


The disrupted cattle cycle is clear evidence of market failure caused by abusive monopsony power.

E. A SHRINKING CATTLE INDUSTRY WITH STAGNANT PRODUCTION IN THE FACE OF GROWING DOMESTIC BEEF CONSUMPTION IS EVIDENCE OF MARKET FAILURE

As shown in Chart 8, total domestic beef consumption peaked in 1976, subsided, and then increased significantly after 1993. In a competitive cattle industry, production would be expected to increase when beef consumption increases. However, the production of beef produced from cattle exclusively born, raised, and slaughtered in the United States has not kept pace with the nation's appetite for beef. Since 1996, domestic beef production has remained relatively stagnant, though beef consumption has risen in recent years to nearly its peak level back in 1976. In fact, from 2004 through 2007, the U.S. cattle industry experienced the largest shortfall in its history between its domestic beef production and the nation's beef consumption.

The shortfall in domestic production is being satisfied with imported beef and beef derived from imported cattle slaughtered in the United States. Thus, a growing shortfall in domestic production means the U.S. cattle industry is losing market share in its own market, and U.S. production is being systematically supplanted by foreign production. The domestic cattle industry would not be constrained from meeting the increase in consumption in its own market if the industry were competitive. The cattle industry is so constrained, as evidenced by ongoing cattle herd liquidation and stagnant production coinciding with increased consumption. This constraint is evidence of severe market failure caused by abusive monopsony power.

IV. ANTICOMPETITIVE BEHAVIOR

The following are examples of known or suspected practices by beef packers that constitute anticompetitive behavior and/or suspected violations of antitrust statutes and the Packers and Stockyards Act:

A. COERCIVE THREATS TO CATTLE PRODUCERS TO ADVANCE BEEF PACKERS' POLITICAL GOALS

Nearly a decade ago, the beef packing industry exacted its market power on the U.S. cattle industry for purposes of influencing national public policy; and, in doing so, imposed unnecessary costs and burdens on U.S. cattle producers. U.S. producers could not avoid these costs and burdens without eliminating or severely limiting their marketing options. In March 2003, beef packer IBP, Inc. (now Tyson) notified U.S. cattle producers that it would require producers to "[p]rovide IBP, Inc. access to your [producers'] records so that [IBP] can perform random producer audits ..." and "[p]rovide third-party verified documentation of where the livestock [IBP] purchase[s] from you [producers] were born and raised." (177) IBP initiated this thinly veiled threat for the express purpose of coercing producers to help IBP contact "Senators or members of Congress," to whom producers were asked to express their concerns regarding plans to impose such onerous conditions on their industry. (178) This was IBP's response to Congress' passage of the mandatory country-of-origin labeling ("COOL) law. (179) This abuse of market power was initiated months before the USDA even published its October 30, 2003 proposed rule to implement the COOL law. (180)

B. IMPOSITION OF ARBITRARY PRODUCTION SPECIFICATIONS THAT LEAD TO PRODUCER DISCOUNTS AND FACILITATE PREFERENTIAL TREATMENT

In addition to the application of price premiums and discounts for contract or grid-priced cattle, based on standardized USDA yield and quality grades, Tyson and Smithfield (now JBS) had each established different price premiums and discounts for additional factors, such as muscle scoring. For example, Smithfield discounted certain muscle scores between $5.00 per cwt and $10.00 per cwt, and Tyson uses muscle scores to apply varying discounts under a different system. (181) These discounts and premiums are purported to reflect consumer preferences, (182) but whether a $120 discount (e.g., from $10 per cwt. applied to a 1,200 lb. animal) reflects the actual discount the beef packer receives upon the sale of the beef, or whether the discount represents a windfall for the beef packing industry, is undeterminable without additional information. Nevertheless, the ability to impose such discounts, without knowing if they are legitimate, is currently facilitated by the limited marketing outlets available to U.S. cattle producers.

In addition, producers that sell cattle "in-the-meat" (i.e., they agree to receive payment after the packer slaughters the cattle and evaluates the animal's carcass traits) rather than "live" (i.e., they receive payment based on the live weight of the animal), are literally at the mercy of the beef packer for determinations of carcass traits. Packers impose a host of discounts for "in-the-meat" sales, including discounts for hard bone, dark cutters, overweight, underweight and overage. But, the beef packer applies discounts for such factors without the producer being present to contest the beef packers' determination. This practice seriously disadvantages producers and is ripe for abuses, including preferential treatment whereby some producers may not be assessed the same discounts assessed to others.

Anecdotal information suggests at least three means of packer abuse. First, some beef packers in some regions do not give cattle producers a choice between selling "in-the-meat" or "live" and only offer bids for "in the meat" sales. Also, beef packers can use discount schemes to grant preferences to certain cattle feeders by, for example, paying preferred feeders an average, non-discounted price for low quality cattle while taking deeper discounts from non-preferred feeders that sell higher quality cattle. Lastly, beef packers pass over some feeders (that is, do not offer a bid for cattle on the feeder's show list) until the feeder's cattle become overweight, at which time the beef packer offers a bid with significant discounts for the heavier-weight cattle. These discounts facilitate preferential treatment.

C. PROCUREMENT PRACTICES LEAD TO PRICING ANOMALIES THAT BENEFIT BEEF PACKERS

An investigation is needed to determine if the pricing strategies of the concentrated beef packers, such as that described in the examples above, are among the reasons for the pricing anomalies disclosed in the LMMS study. When comparing the price differences between cattle sold on a carcass weight basis with a grid valuation and cattle sold on a live weight basis, the LMMS study found that "compared with direct trade transactions with live weight valuation, ... direct trade transactions with carcass weight dependent on grid valuation are 1.8 cents lower, holding other explanatory variables in the model fixed." (183)

This outcome whereby cattle sold to meatpackers on a carcass weight basis with a grid valuation brought less money than cattle sold on a live weight basis is contrary to competitive market fundamentals. Selling on a carcass weight basis with a grid, otherwise known as grade and yield, (184) has been represented to cattle feeders as a means to receive quality premiums for their higher quality cattle. (185) However, this finding, as well as the findings of many cattle feeders who have sold on a grade and yield basis, suggests that the largest meatpackers have designed their grids not only to transfer price risk from the meatpacker to the producer, (186) but also, to depress the prices paid for a large number of cattle procured from producers. (187) It is no wonder that many independent cattle producers refer to the grade and yield valuation method as "Grade and Steal."

D. CURRENT PROCUREMENT PRACTICES FACILITATE A DIVISION OF THE MARKET THAT MAY ELIMINATE COMPETITION FOR CERTAIN SUBCLASSES OF CATTLE IN CERTAIN REGIONS

Tyson recently issued new terms and conditions under which it will purchase cattle for slaughter. (188) Tyson states that it "does not typically accept for processing at its facilities" cattle that exceed 58 inches in height, cattle that exceed 1,500 pounds, or cattle with horns longer than 6 inches in length. (189) The imposition of such restrictions presents a number of competition-related concerns. First, for example, if Tyson is one of only two buyers in the marketing region where such restricted cattle could become available, cattle are approaching but have not yet exceeded any of Tyson's restrictions, and if the other buyer imposed no comparable restrictions, then the other buyer would have an incentive not to bid on such cattle. If Tyson subsequently did not purchase, the cattle would then be available for sale at a discount as soon as Tyson's restrictions were exceeded. In fact, Tyson would have an incentive to lowball these same cattle before they exceed restrictions knowing that if the producer did not sell to Tyson quickly, there would be no competition for the cattle after the restrictions were exceeded. Second, for cattle that already exceed Tyson's restrictions, regardless of the demand for beef, the producer would have significantly fewer market outlets for the cattle. Third, the beef packers can manipulate the weight of cattle simply by limiting market access to a cattle feeder, such as bypassing cattle feeders with slaughter-ready cattle. (190)

The imposition of certain restrictions on the type of cattle a beef packer will purchase could constitute an outright denial of access to the marketplace for producers with only one or two packer buyers. Otherwise, it could result in the division of the marketplace if, for instance one beef packer were to accept only steers, only heifers, only Holsteins, or only hornless cattle. If this were to occur, or if it is occurring, the marketplace could be sufficiently divided by the few beef packers to severely limit competition for each subclass of cattle, if not eliminate competition altogether.

E. THE BEEF PACKERS' DOMINANCE IN THE CASH MARKET IS MIRRORED IN THE FUTURES MARKET, WHERE THEY ALSO CAN EXERCISE MARKET POWER

Beef packers are able to significantly influence the commodities futures market, rendering it unsuitable for managing the risks of independent cattle producers. Practices such as shorting the market to drive down both cash and futures prices, particularly on the last trading day of the month before futures contracts expire, are a form of market manipulation. For example, the October 2009 futures board broke the limit down on the last trading day in October, causing an unprecedented number of live cattle deliveries to occur. (191) Based on information and belief, the manipulative practices by the beef packers in the commodities futures market has created a disinterest among speculators who would otherwise participate in long speculative positions in the market. The lack of speculative long positions in the market may well be depressing the cash and futures market by several dollars per cwt and reducing the utility of the commodity futures market as a risk management tool for cattle producers.

F. CONCENTRATED BEEF PACKERS ARE UNIQUELY POSITIONED TO MANIPULATE BEEF DEMAND TO PREVENT U.S. CATTLE PRICES FROM RESPONDING TO TIGHT DOMESTIC SUPPLIES

The mandatory COOL law implemented in 2009 was expected to allow a consumer preference for USA beef to translate directly into an increased demand for cattle born, raised, and slaughtered in the United States. However, the nation's beef packers resisted the COOL law and began labeling exclusively USA beef with a multi-country label, such as "Product of Mexico, Canada and the U.S." The effect of this action was to thwart consumer demand for exclusively domestic beef from translating into a demand for USA cattle, thus enabling beef packers to continue satisfying only a generic demand for beef and sourcing the cattle needed to satisfy that generic demand from any country.

In addition to the discussion above regarding the beef packers' ability to manipulate beef consumption though its control over the price and output of competing proteins, just as the concentrated beef packers are the gatekeepers to the slaughter market for fed cattle, their tremendous market dominance also makes them gatekeepers to the flow of beef to retail stores and consumers. Either unilaterally or in concert with retailers, beef packers can suppress domestic demand for beef by maintaining high beef prices. The effect of this action would be to suppress the U.S. cattle market even when cattle supplies are at an all-time low. This appears to be what is taking place in the marketplace today: consumer beef prices are being held at or near record levels and despite the tight cattle supply situation, cattle prices are highly volatile. A more thorough investigation of the beef packers' wholesale and retail selling practices is needed to determine the extent to which the beef packing industry is manipulating beef demand, hence the price and demand for U.S. cattle.

G. COMPLAINTS BY INDEPENDENT CASH MARKET CATTLE FEEDERS

Below are specific complaints regarding ongoing anticompetitive practices by meatpackers operating in the fed cattle cash market that independent cattle feeders have forwarded to the DOJ. The cattle feeders assert that these practices are reducing, if not eliminating, their opportunity to maintain profitable cattle feeding operations. Currently, however, the DOJ has not taken action to restore the integrity of their markets.

(1) Independent cattle feeders will receive bids for their pen(s) of cattle only from one packer for an extended time period, and for the next extended time period, a different packer will step in to offer the only bid, and then the rotation continues. This rotation of packer bids means there is no competition for the cattle feeders' pen(s) of cattle and even though there is more than one beef packer buying cattle in the feedlot, each beef packer is able to offer a take-it-or-leave-it bid to cattle feeders for each pen of cattle. And, this lack of competition in the cash market translates to a reduced price for all cattle contracted under alternative marketing agreements.

(2) Independent cattle feeders will receive only below market-price bids for high-quality, fed cattle from a beef packer that continually passes them over while offering either higher bids for similar or even lower quality cattle, or offering the same bid for green cattle, all of which cattle are a farther distance from the beef packer's plant. The beef packer will then return after a week or even longer to offer the cattle feeders a market-price bid when the cattle are known to be overfed, which effectively reduces the profitability for the cattle feeders.

(3) Independent cattle feeders may have more than one beef packer buying cattle in the feedlot, but only one beef packer will offer a live-weight bid, which is below market price, while the other beef packer will bid market price only on a grade and yield basis. To receive market price, feeders must choose grade and yield, which not only requires them to pay transportation costs to the plant, but also, it allows the beef packer to apply deep price discounts to the cattle without the beef packer having to provide any dispositive justification for the discounts. As a result, cattle feeders receive an even lower price for their cattle than if they had sold their cattle at the below-market bid offered by the only beef packer that would offer a live-weight bid.

(4) Independent cattle feeders will receive a bid for a pen of slaughter-ready cattle from a beef packer that owns more than one packing plant. And, even though one or more of the beef packers' other packing plants, which are located about the same distance from the feedlot, are offering a higher bid, the beef packer offers the cattle feeders only a lower bid and asserts the feeders cannot deliver cattle to the plants were the higher bids are being offered, even though the feeders have previously sold similar quality cattle to the other plants. As a result, the feeders must accept the lower bid in order to timely market their cattle. And, this lower price paid to cattle feeders in the cash market translates into lower prices for all the cattle contracted under alternative marketing arrangements.

(5) Independent cattle feeders may have more than one beef packer buying cattle in the feedlot, but will only receive a bid reflective of the market price from one beef packer that, in return for offering the current market price for cattle that have reached their optimal slaughter weight, requires the feeders to delay delivery of the cattle for as long as three weeks. As a result, the cattle feeders' profitability is reduced because they must continue feeding their cattle after they have reached their optimal weight (a period when feed efficiency is drastically reduced) and the cattle feeders are responsible for the additional feeding costs.

(6) Independent cattle feeders have agreed to sell their cattle at a top-of-the-market price. However, after the sale is consummated and cattle are being loaded on trucks for delivery to the beef packer, the beef packer demands that a group of cattle be held back and exempted from the sale. Then, a week or longer later, after cattle prices have fallen, the same beef packer returns to purchase the group of previously exempted cattle at the lower price. As a result, the cattle feeders' average price for their pen(s) of cattle is effectively reduced, thus reducing, if not eliminating, their profits.

(7) Independent cattle feeders have received only below-market-price bids for their cattle for extended periods of time and have been informed that the beef packers have adequate supplies of captive supply cattle to enable them to stay out of the cash market for several weeks. As a result, the cattle feeder is forced to accept the below-market-price bid if he is to gain timely access to the marketplace, (i.e., before his cattle become overfed). Because the beef packers' captive supply cattle are tied to the cash market price, this below-market-price sale effectively lowers the price for all captive supply cattle-all the other cattle committed to the packer through alternative marketing arrangements.

(8) Independent cattle feeders have sold high quality cattle on a carcass weight basis to a beef packer that subsequently applied substantial discounts to their cattle while the beef packer was simultaneously buying lesser quality cattle from a preferred feedlot without subjecting the cattle from the preferred feedlot to any comparable discounts.

The anticompetitive practices described above are believed to be rampant in today's cash market for fed cattle. However, because these practices directly affect the profitability of individual cattle feeders without necessarily causing direct injury to the competitiveness of the entire cattle industry, cattle feeders subjected to these anticompetitive practices have no recourse under the conventional interpretations of antitrust laws and the Packers and Stockyards Act.

For these anticompetitive practices to be enjoined, individual cattle feeders must be exempted from the burden of proving harm to competition in the entire cattle industry in addition to proving the packers' practices caused them irreparable harm. Until such an exemption is provided, these and other serious anticompetitive practices will continue to drive independent cattle feeders out of business and will continue reducing the volume of cattle sold in the price discovery market, which will result in lower-than-competitive prices for all cattle feeders, regardless of whether they sell cattle in the cash market or through alternative marketing arrangements.

In addition to the serious problems in the cash market for fed cattle, U.S. cow/calf producers also have experienced a severe reduction in competition in the cash market for their cull cows and bulls. In the Midwest and West, several beef packers have joined together to share a single cattle buyer for all of their plants. As a result, rather than having three or more beef packers bidding for the ranchers' cull cows and bulls, only a single buyer was seated in the auction yards bidding for all the cattle needed by all the beef packers. This eliminated competition for cull cows and bulls and the beef packers were able to purchase their cattle without having to bid against one another, thus reducing the price paid to U.S. ranchers for their cull cows and bulls.

VI. SUMMARY AND CONCLUSION

An early twentieth century legal framework preserved competition between the live cattle industry and the beef packing industry by delineating proper roles for industry competitors. It ensured, for example, that dominant meatpackers could not expropriate the cattle feeding sector from the live cattle industry's supply chain to eliminate competition between themselves--the concentrated buyers--and widely dispersed cattle feeders--the independent sellers. The importance of that competition at the interface between the live cattle industry and the beef packing industry cannot be overstated; here, fundamental price discovery occurs for all cattle reared by all livestock producers, be they cow/calf producers, backgrounders, stockers, or feeders.

Throughout the ensuing decades, the competition preserved by that early legal framework fostered the growth of the largest single segment of American agriculture. The recently vibrant live cattle industry once comprised well over one million small businesses, each of which had made crucial, if not irreplaceable, contributions to the economic wellbeing of rural communities all across America. Similarly, the very competition preserved at the interface between the live cattle industry and the beef packing industry, along with the then concomitant national disdain for beef packer monopolization, encouraged the growth of many hundreds of widely dispersed, hence, decentralized, beef packing and processing wholesale (distribution) firms, which likewise greatly benefited Rural America's economy.

As the twentieth century waned, however, so too did the nation's resolve to preserve competition in the live cattle industry and defy monopolization in the beef packing industry. Beginning in the 1980s, key competitive protections were allowed to expire, chief among them were prohibitions against beef packer ownership and control of the live cattle industry's marketing channels. Antitrust enforcement was idled, thus sparking a merger mania in the beef packing industry. In three short decades, the beef packers attained an unprecedented level of market concentration, which conferred upon a handful of them the power to circumvent competition by restricting cattle feeders' access to the marketplace. This eliminated marketing opportunities for tens of thousands of cattle feeders who, by exiting the industry, helped fuel the rapid concentration and consolidation of the cattle feeding sector. This rapid feeding sector concentration and consolidation, in turn, eliminated marketing opportunities for hundreds of thousands of cattle producers, including cow/calf producers, backgrounders and stockers who likewise exited the industry.

The live cattle industry now finds itself traversing the same path toward the industrial livestock production model that was previously blazed by the now fully integrated poultry industry and near-fully integrated hog industry. This circumstance relegates the U.S. cattle industry to the meatpacking industry's Last Frontier.

So brazen have the powerful beef packers become since vigilance over competition ended that they recently infiltrated and then enlisted producer trade associations to join them as they collude to lobby Congress. Their objective is to perpetuate a relaxed legal framework that will help them propel their vertical integration plan for the live cattle industry. Their plan involves the substitution of their corporate command-and-control scheme for the element of the free market system that America cherishes most: competition.

Today, the beef packers are well on their way to capturing the live cattle supply chain. Competition at the interface between the live cattle industry and the beef packing industry is all but destroyed. The remaining vestige of a competitive marketplace--the price-discovery cash market--is far too thin to predict a competitive value for fed cattle and is growing thinner, thus causing harm to competition for all cattle producers. To perfect their ability to manipulate the fed cattle market, the beef packers have deployed a mix of market leveraging strategies that involve captive supplies, which are cattle committed to the beef packer long before they are slaughtered. Beef packers accumulate large volumes of captive supplies via direct acquisitions of feedlots and cattle and through contractual arrangements that often include un-priced or formula pricing. In this century, beef packers demonstrated how their captive supplies can harm competition when they engaged in coordinated actions to use their captive supply cattle to shun the cash cattle market long enough to cause national cattle prices to decline

Less obvious among market leveraging strategies, though no less damaging to competition, is the reported phenomenon whereby packers gain deferential buying rights at certain feedlots by virtue of past buying patterns, thus giving them virtual ownership of certain feedlots. Also less obvious is the additional market power conferred on those concentrated beef packers that also control the production and output of the principal market substitutes for beef--primarily pork and chicken--and that control the timing of procurement for product substitutes for domestic cattle: imported cattle. The exercise of these and other strategies facilitated by their extraordinary market power has enabled the concentrated beef packers to gain significant control over the live cattle supply chain.

But, harm to competition is but one injury inflicted on the remaining participants in the live cattle industry. Other injuries are targeted more and involve the beef packers' exercise of their superior and unfair bargaining power over individual producers. One example involves a beef packer that bypasses slaughter-ready cattle owned by independent cattle feeders in favor of procuring cattle from farther distances that are not yet ready for slaughter. However, the beef packer later returns to buy the independent cattle feeder's cattle only after they had become over-fed and, therefore, less valuable.

Beef packers and their allies find no problem with the loss of competition in the U.S. cattle industry and dismiss any claims of anticompetitive conduct or antitrust violations on grounds that their integration of the U.S. cattle industry is justified by efficiencies gained through economies of scale. However, such a justification cannot withstand the evidence that shows severe market failure in the U.S. cattle industry and U.S. beef industry. For example, it now costs more than at anytime in recent history to bring the raw cattle product to the consumers' dinner plate; the U.S. cattle industry has been contracting, and its production has remained stagnant even in the face of growing beef consumption; the U.S. cattle industry's cattle cycle--the industry's historical bellwether indicator of industry competitiveness--has been seriously disrupted; and, the marketplace is allocating a smaller share of the consumers' beef dollar back to the cattle feeder than it did in 1980, when competition was known to be robust.

After years of neglect by Congress, antitrust enforcers, and Packers and Stockyards Act enforcers, the U.S. cattle industry's fed cattle market is seriously broken. Immediate action must be taken to restore robust competition at the interface between the live cattle industry and the beef packing industry. If immediate action is not taken, the U.S. cattle industry will soon succumb to the same fate as the previously captured hog and dairy industries that lost 91 percent and 82 percent of their industry participants just since 1980, respectively.

As an initial matter, dominant beef packers must be barred from using their collective market power to lobby Congress for purposes of perpetuating a legal framework that facilitates their ongoing capture of the U.S. live cattle supply chain. If this initial step is not achieved, thereby leaving the beef packers' current level of congressional influence unchanged, prospects for achieving any meaningful reforms will remain extremely slim.

Presuming an opportunity to overcome the beef packers' collective influence over public policy, public policies must be changed to force beef packers to relinquish their control over the live cattle supply chain and their proper role in the multi-segmented beef supply chain must again be limited to that of beef packer and nothing more. Specifically, beef packers must be prohibited from owning, controlling or feeding cattle prior to slaughter, and the most egregious of captive supply contracts, the un-priced formula contracts, must likewise be prohibited.

Concurrent with banning their access to captive supply cattle, dominant beef packers also must be enjoined from engaging in unfair and unjust buying practices that injure individual cattle producers. Unless dominant beef packers are so enjoined from such anticompetitive conduct, they will continue to possess the power to accelerate the concentration and consolidation of the cattle feeding sector by forcing independent cattle feeders out of business one at a time.

A significant problem associated with restoring competition to the U.S. cattle industry's fed cattle market, which has been held under siege with impunity for at least three decades, is that the dominant beef packers' antitrust activities and anticompetitive conduct are now so deeply engrained as to be institutionalized. As a result, participants within and policy makers outside the cattle industry have become desensitized to practices that, for most of the twentieth century, would have been immediately recognized as contrary to the principles of a free market.

Notwithstanding the significant obstacles that impede reform, cattle producers, their attorneys, advisors and advocates, along with their congressional representatives, must immediately engage themselves and their resources to restore robust competition to the U.S. fed cattle market. Only then can the ailing U.S. live cattle industry be reinvigorated to attract new generations of independent producers who, like their forefathers, will appreciate their roles as independent businessmen and women whose businesses are uniquely suited to serve as the crucial economic cornerstones for rural communities all across America.

(1.) See ECON. RESEARCH SERV., USDA, U.S. FARM SECTOR CASH RECEIPTS FROM SALES OF AGRICULTURAL COMMODITIES, 2008-2012F (2012), available at http://www.ers.usda.gov/datafiles/Farm _Income/US_Farm_Income_and_Wealth_Statistics_includes_the_US_Farm_Income_Forecast_2012/Cr _t3.pdf. Average cash receipts from the sales of live cattle and calves from 2002-2-011, at $50 billion, far exceeds the average cash receipts for any other U.S. agricultural commodity during that period, Id.

(2.) See Timothy A. Wise and Sarah E. Trist, Buyer Power in U.S. Hog Markets. A Critical Review of the Literature 7 (Global Development and Environment Institute, Working Paper No. 10-04, 2010), available at http://www.ase.tufts.edu/gdae/Pubs/wp/10-04HogBuyerPower.pdf. "Similar to trends in the poultry industry, contract production of hogs is now occurring all over the United States." Id. at 7. Hog production contracts, whereby "[p]ackers may provide technical advice, dictate management techniques, and monitor the compliance of the grower[,] ... covered only five percent of production in 1992, but grew to include 28 percent of operations and 67 percent of hog inventory in the United States by 2004." Id. at 11 (citations omitted). Describing the corporate takeover of independent poultry businesses that occurred after the 1950s, Sparks Companies stated:

   Over time, these independent businesses were combined by
   "integrators", who reduced costs by coordinating the production of
   each stage. As a result, an industry once characterized by tens of
   thousands of small, specialized businesses became characterized by
   hundreds of vertically integrated firms. Through horizontal
   integration, however, that number was reduced to about 50 by the
   1990's.


SPARKS COS. INC., POTENTIAL IMPACTS OF THE PROPOSED BAN ON PACKER OWNERSHIP AND FEEDING OF LIVESTOCK 60 (2002), available at http://www.r-calfusa.com/Competition/020318SparksStudy.packerBan.pdf; see also Packers and Stockyards Issues. Hearing Before the S. Comm. on Agric., Nutrition, and Forestry, 107th Cong. 45 (2002) (statement of Herman Schumacher, Director of R-CALF USA).

(3.) See Nat'l Agric. Statistics Serv., 2012 USDA FARMS, LAND IN FARMS, AND LIVESTOCK OPERATIONS: SUMMARY 18 (2013), available at http://usda01.library.cornell.edu/usda/current/FarmLan dIn/FarmLandIn-02-19-2013.pdf (showing 729,000 beef cattle operations in the U.S. in 2012).

(4.) See U.S. CENSUS BUREAU, U.S. DEP'T OF COMMERCE, 2012 North American Industry Classification System, http://www.census.gov/cgi-bin/sssd/naics/naicsrch?chart=2012 (last modified Nov. 7, 2011). The live cattle industry (classified under sector 112) is a subset of the U.S. agriculture industry (sector 11), whereas beef packers (sector 3116) are a subset of manufacturers (sector 31-33). Id.

(5.) See SPARKS COS. INC., supra note 2, at 24. "Vertical integration often attracts investors because of the negative correlation between profit margins at the packing stage and the feeding stage." Id.

(6.) See U.S. DOJ, NON-HORIZONTAL MERGER GUIDELINES [section] 4.0, at 23 & n.25 (1984), available at http://www.justice.gov/atr/public/guidelines/2614.htm.

(7.) See, e.g., Grain Inspection, Packers and Stockyards Admin., 2009 USDA ANN. REP.: PACKERS AND STOCKYARDS PROGRAM 62 (2010), available at http://www.gipsa.usda.gov/Publications/psp/ar/200 9_psp_annual_report.pdf. In 2008, the world's largest beef packer, Brazilian-owned JBS, purchased the U.S. feedlot company Five Rivers Ranch Cattle Feeding, LLC ("Five Rivers"), the largest feedlot company in the United States. Id.

(8.) See C. Robert Taylor, Legal and Economic Issues with the Courts" Rulings in Pickett v. Tyson Fresh Meats, Inc., a Buyer Power Case 9 (The Am. Antitrust inst., Working Paper No. 07-08, 2007), available at http://www.antitrustinstitute.org/files/AAI_Taylor_WP07-08_033020070955.pdf.

(9.) See DEMOCRATIC STAFF OF THE S. COMM. ON AGRIC., NUTRITION, AND FORESTRY, ECONOMIC CONCENTRATION AND STRUCTURAL CHANGE IN THE FOOD AND AGRICULTURE SECTOR: TRENDS, CONSEQUENCES AND POLICY OPTIONS 16 (2004), available at http://www.sraproject.org/wpcontent/uploads/2007/12/harkinconcentrationwhitepaper.pdf (citing United States v. Swift & Co., 286 U.S. 106, 111 (1932)).

(10.) Swift & Co., 286 U.S. at 110 (identifying the Big Five meatpackers at the time as Swift & Co., Armour & Co., Morris Packing Co., Cudahy Packing Co., and Wilson & Co.).

(11.) See Government Printing Office, 1921 FTC ANN. REP. FOR THE FISCAL YEAR ENDED JUNE 30, 1921, at 42-43, available at http://www.ftc.gov/os/annualreports/ar 1921.pdf; see also Swift & Co., 286 U.S. at 111.

(12.) Robert M. Aduddell & Louis P. Cain, A Strange Sense of Deja Vu: The Packers and the Feds, 1915-82, 11 BUS. & ECON. HIST. (2d s.) 49, 49 (1982), available at http://www.h-net.org/-business/bhc web/publications/BEHprint/toc 111982.html.

(13.) 9 C.F.R. [section] 201.70a (1984) (repealed 1984).

(14.) 49 Fed. Reg. 33003 (Aug. 20, 1984) (to be codified at 9 C.F.R. pt. 201); J. Dudley Butler, ExGIPSA Administrator J. Dudley Butler Speak~ at NeFU Convention, FARM AND RANCH LAW (Dec. 8, 2012), http ://farmandranchlaw.com/ex-gipsa-administrator-j -dudley-butler-speaks-at-nefu-convention/ (00:29:56) (last visited Feb. 03, 2013) (addressing the Nebraska Farmers Union).

(15.) KENNETH H. MATHEWS JR. ET AL., ECON. RESEARCH SERV., MKT & TRADE ECON. DIV., USDA, TB-1874, U.S. BEEF INDUSTRY: CATTLE CYCLES, PRICE SPREADS, AND PACKER CONCENTRATION 10 (1999), available at http://www.ers.usda.gov/publications/tb-technicalbulletin/tb 1874.aspx.

(16.) See Grain Inspection, Packers & Stockyards Admin., 2006 USDA PACKERS AND STOCKYARDS STAY. REP. 44 tbl.27 (2008), available at http://archive.gipsa.usda.gov/pubs/2006_stat_report.pdf.

(17.) See Grain Inspection, Packers & Stockyards Admin., 2011 USDA P&SP ANN. REP.: PACKERS AND STOCKYARDS PROGRAM 34 (2012), available at http://www.gipsa.usda.gov/Publications/psp/ar/20 11 _psp_annual_report.pdf.

(18.) See Grain Inspection, Packers & Stockyards Admin., supra note 16, at 11 tbl. 1; see also Grain Inspection, Packers & Stockyards Admin., supra note 17, at 33 fig.14.

(19.) See Nat'l Agric. Statistics Serv., USDA, LIVESTOCK SLAUGHTER: 2011 ANNUAL SUMMARY 17 (2012), available at http://usda01.library.cornell.edu/usda/current/LiveSlauSu/LiveSlauSu-04-23-2012.pdf. Federally inspected cattle slaughter during 2011 totaled approximately 33.6 million head. Id.

(20.) See id. Approximately 26.3 million steers and heifers were slaughtered in federally inspected plants in 2011, and 85% of those steers and heifers is about 22.3 million. For the number of packing plants owned by the four largest packers, see Our Locations--List, TYSON FOODS, http://www.tyson.com/Corporate/AboutTyson/Locations/ListPage.aspx (last visited Mar. 9, 2013); North American Beef Facilities, CARGILL MEAT SOLUTIONS, http://www.cargillmeatsolutions.com/about_us/tk _cms_about_loc_beef.htm (last visited Mar. 9, 2013); Locations, JBS, http://www.jbssa.com/Careers/Lo cations/default.aspx (last visited Apr. 9, 2013); Beef Processing, NATIONAL BEEF, http://www.nationalbeef.com/About/Business/Pages/Beef-Processing.aspx (last visited Feb. 4, 2013).

(21.) The number of U.S. feedlots declined from 113,326 in 1980 to 77,120 in 2011. Compare Crop Reporting Bd., Econ. & Statistics Serv., JAN. 1981 USDA CATTLE ON FEED 12, available at http ://usda01.library.cornell.edu/usda/nass/CattOnFe//1980s/1981/CattOnFe-01-19-1981.pdf, with Nat'l Agric. Statistics Serv., FEB. 2012 USDA CATTLE ON FEED 16, available at http://usda01.library.cornell.edu/usda/nass/CattOnFe//2010s/2012/CattOnFe-02-24-2012.pdf.

(22.) 36,182 of the 36,206 feedlots that exited the industry between 1980 and 202011 had a capacity of less than 1,000 head. Compare Crop Reporting Bd., supra note 21, at 11, with Nat'l Agric. Statistics Serv., supra note 21, at 16.

(23.) See Nat'l Agric. Statistics Serv., FEB. 2009 USDA CATTLE ON FEED 14, available at http ://usda01.library.comell.edu/usda/nass/CattOnFe//2000s/2009/CattOnFe-02-20-2009.pdf; Nat'l Agric. Statistics Serv., FEB. 2010 USDA CATTLE ON FEED 14, available at http://usda01.library.cornell.e du/usda/nass/CattOnFe//2010s/2010/CattOnFe-02-19-2010.pdf; Nat'l Agric. Statistics Serv., FEB. 2011 USDA CATTLE ON FEED 16, available at http://usda01.library.cornell.edu/usda/nass/CattOnFe//2010s/20 11/CattOnFe-02-18-2011.pdf; Nat'l Agric. Statistics Serv., supra note 21, at 16; Nat'l Agric. Statistics Serv., FEB. 2013 USDA CATTLE ON FEED 16, available at http://usda01.library.cornell.edu/usda/nass/Cat tOnFe//2010s/2013/CattOnFe-02-22-2013.pdf.

(24.) See Nat'l Agric. Statistics Serv., supra note 21, at 16.

(25.) See id.

(26.) See id.

(27.) See supra Parts B. 1-2.

(28.) Persons that raise and sell lighter weight cattle include cow/calf producers, backgrounders, and stockers. Cow/calf producers typically maintain a breeding cow herd year round and annually market one calf per cow when the calf reaches about four to six months of age. Backgrounders typically purchase calves from cow/calf producers, grow them for several months on a predominantly forage-based diet, and then market them to stockers when they are approximately eight to twelve months of age, or to feedlots when they are about twelve to fifteen months of age. Stockers typically purchase calves from cow/calf producers or from backgrounders, and they run them on either tame or native pastures or winter wheat fields prior to marketing them to feedlots when they are about twelve to fifteen months of age.

(29.) Compare Crop Reporting Bd., supra note 21, at 11, with Nat'l Agric. Statistics Serv., supra note 21, at 16.

(30.) Compare Crop Reporting Bd., Econ. & Statistics Serv., JAN. 1981 USDA CATTLE 16, available at http://usda01.library.cornell.edu/usda/nass/Catt//1980s/1981/Catt-01-30-1981.pdf, with Nat'l Agric. Statistics Serv., supra note 3, at 18.

(31.) See 72 Fed. Reg. 44,681 (Aug. 8, 2007) (to be codified at 7 C.F.R. pt. 59); see also infra Chart I. Compare Crop Reporting Bd., supra note 30, at 16, with Nat'l Agric. Statistics Serv., supra note 3, at 18-19.

(32.) See S. 1731, 107th Cong. [section] 1021(a)(2)(f) (2001); 147 CONG. REC. S13,093 (daily ed. Dec. 13, 2001).

(33.) JOHN CONNOR, PETER C. CARSTENSEN, ROGER A. McEOWEN & NEIL E. HARE, THE BAN ON PACKER OWNERSHIP AND FEEDING OF LIVESTOCK: LEGAL AND ECONOMIC IMPLICATIONS 13 (2002), available at http://www.econ.iastate.edrdsites/default/files/publications/papers/p7173-2002-03-01.pdf.

(34.) See J. PATRICK BOYLE, AM. MEAT INST., STATEMENT OF THE AMERICAN MEAT INSTITUTE ON AG ECONOMISTS' DEBATE OVER PACKER OWNERSHIP BAN (2002), available at http://www.meatami.com/ht/d/ReleaseDetails/i/3000.

(35.) See Prohibition on Packers Owning, Feeding, or Controlling Livestock, H.R. 2419, 110th Cong. [section] 10207 (2007).

(36.) Letter from American Meat Institute, Cargill, National Beef, National Cattlemen's Beef Association, National Meat Association, Swift & Co., and Tyson Foods, Inc. et al., to Tom Harkin, Chairman, S. Comm. on Agric., Nutrition, & Forestry (Oct. 18, 2007), available at http://www.nppc.org/2007/10/farm-bill-livestock-mark-letter (emphasis added).

(37.) To put this rate of loss of family cattle ranches in perspective, the U.S. lost 538,950 beef cattle ranches from 1980-2011, representing a loss rate of over 17,000 ranches per year for 31 years. The loss of 17,000 ranches per year is the equivalent of losing more beef cattle ranches per year than there are in each of the entire states of Arizona, California, Colorado, Idaho, Minnesota, Montana, North Dakota, South Dakota, Wyoming, and many other states considered to be "cattle" states. See Nat'l Agric. Statistics Serv., USDA, 2008 USDA FARMS, LAND IN FARMS, AND LIVESTOCK OPERATIONS: SUMMARY 18 (2009), available at http://usda01.library.comell.edu/usda/nass/FarmLandIn//2000s/2009/FarmLandI n-02-12-2009.pdf.

(38.) See supra Chart 1. For Example, in February 2008, the USDA stated, "The structure of the U.S. hog production industry has changed dramatically in the past 25 years." MILDRED M. HALEY, ECON. RESEARCH SERV., USDA, LDP-M-164, LIVESTOCK, DAIRY, & POULTRY OUTLOOK 14 (Feb. 2008), available at http://usda01.1ibrary.cornell.edu/usda/ers/LDP-M//2000s/2008/LDP-M-02-15-2008.pdf. Similar to that of the cattle industry, this "dramatically" changed structure of the hog industry includes the consolidation of the industry, where "fewer and larger operations account for an increasing share of total output." William D. McBride & Nigel Key, Hog Operations Increasingly Large, More Specialized, AMBER WAVES, February 2008, at 8, available at http://webarchives.cdlib.org/swl vh5dg3r/ http://ers.usda.gov/AmberWaves/February08/PDF/AW_February08.pdf.

(39.) Letter from American Meat Institute, Cargill, National Beef, National Meat Association, Swift & Co., and Tyson Foods, Inc. et al., to Leonard Boswell, Chairman, House Agric. Subcomm. on Livestock, Dairy, and Poultry (May 23, 2007), available at http://www.r-calfusa.com/Competition/0705 23-MeatandPoultryPromotionCoalitionLetter.pdf. The foregoing corporations are the nation's four largest beef packers that control 85% of the fed cattle market and their two trade associations. Packers and their trade association had joined the letter, suggesting direct collusion.

(40.) News Release, National Cattlemen's Beef Association, NCBA Statement on Canadian WTO Complaint against U.S. COOL Law, October 7, 2009 (on file with South Dakota Law Review).

(41.) About Us, NATIONAL CATTLEMEN'S BEEF ASSOCIATION, http://www.beefusa.org/aboutus.aspx (last visited Feb. 6, 2013) (emphasis added).

(42.) Id.

(43.) See National Cattlemen's Association, NATIONAL CATTLEMEN'S BEEF ASSOCIATION, http://www.beefusa.org/nationalcattlemensassociation.aspx (last visited Feb. 6, 2013).

(44.) See Board of Directors - Policy Division, NATIONAL CATTLEMEN'S BEEF ASSOCIATION, http://www.beefusa.org/boardofdirectors-policydivision.aspx (last visited Feb. 6, 2013). NCBA Director Ken Bull from Wichita, Kansas was Cargill's Vice President for Cattle Procurement. Press Release, Nat'l Cattlemen's Beef Ass'n, National Competition Honors Cattle Auctioneer and Dairy Producers (Jan. 28, 2010), available at http://www.beefusa.org/newsreleasesl.aspx?newsid=2211; Speakers, Beef Quality Summit, BEEF MAGAZINE, http://beefmagazine.com/sitefiles/beefmagazine.com/files/archive/be efmagazine.com/BEEFQualitySummit/Speakers.pdf (last visited Feb. 6, 2013); see also Ken Bull, Cargill VP of Beef Procurement, To Retire, BEEF MAGAZINE, http://beefmagazine.com/ken-bull-cargill- vp-beef-procurement-retire (last visited Feb. 6, 2013). NCBA Director Todd Allen is the President of cattle feeding operations for Cargill Beef. Livestock Producers Elect Allen, Smith to Leadership Posts, CATTLE TODAY (Dec. 9, 2008), http://cattletoday.corn/archive/2008/December/CT1820.shtml. The NCBA and the National Pork Producers Council ("NPPC") each joined with the National Meat Association in opposition to the proposed GIPSA rule and each had meatpackers seated on their governing boards, such as Ken Bull and Todd Neff. Former NPPC Director Todd Neff from Dakota Dunes, South Dakota is Vice President for Pork Procurement for Tyson Fresh Meats, Inc. Press Release, Nat'l Pork Producers Council, NPPC Elects New Officers, Board Members at Pork Forum (Mar. 12, 2010), available at http://www.nppc.org/2010/03/for-the-week-ending-march-12-2010; see Letter from Todd Neff, Vice President of Pork Procurement, to Valued Hog Supplier (Oct. 25, 2010), available at http://www.tysonfoods.com/Business-to-Business/Fresh-Meats/~/media/4D99FCD464ED4F57A887E8F C931435AA.ashx.

(45.) See, e.g., Letter from American Meat Institute, Cargill, National Beef, National Meat Association, Swift & Co., and Tyson Foods, Inc. et al., to Tom Harkin, Chairman, S. Comm. on Agric., Nutrition, & Forestry, supra note 36; News Release, John Queen, President, Nat'l Cattlemen's Beef Ass'n, NCBA Editorial: Government meddling threatens cattle industry's future (Nov. 8, 2007) (opposing packer ownership ban), available at http://www.beefusa.org/newsreleases1.aspx?newsid=150 5; News Release, National Cattlemen's Beef Association, supra note 40; News Release, National Cattlemen's Beef Association, NCBA: Vilsack Ignores Bipartisan Attempt to Help Cattle Industry (Oct. 20, 2010), available at http://www.beefusa.org/newsreleasesl.aspx?NewsID=2136 (opposing GIPSA rule on grounds it would further inject the federal government into the market).

(46.) U.S. GEN. ACCOUNTING OFFICE, GAO-02-246, ECONOMIC MODELS OF CATTLE PRICES: HOW USDA CAN ACT TO IMPROVE MODELS TO EXPLAIN CATTLE PRICES 30 (2002), available at http://www.gao.gov/assets/160/157218.pdf.

(47.) Cattle & Beef: Background, ECON. RESEARCH SERV., USDA, http://www.ers.usda.gov/topics/ animal-products/cattle-beef/background.aspx (last updated May 26, 2012).

(48.) See Nat'l Agric. Statistics Serv., supra note 21, at 16.

(49.) CLEMENT E. WARD, OKLA. COOP. EXTENSION SERV., DIV. OF AGRIC. SCIS. & NATURAL RES., OKLA. STATE UNIV., PACKER CONCENTRATION AND CAPTIVE SUPPLIES 554-5, available at http://pods.dasnr.okstate.edu/docushare/dsweb/Get/Rendition-6018/AGEC-554web.pdf.

(50.) Clement E. Ward, A Review of Causes for and Consequences of Economic Concentration in the U.S. Meatpacking Industry, CURRENT AGRIC. FOOD AND RESOURCE ISSUES, no. 3, 2002, at 2, available at http://caes.usask.ca/cafri/search/archive/2002-ward3-1.pdf. Dollar per hundredweight is symbolized as "$/cwt."

(51.) Lynn Hunnicutt, Market Power in the Beef Packing Industry. Is It Time For a New Approach? 10-11 (Economic Research Study Paper, Paper 207, 2000), available at http://digitalcommons.usu.edu/c gi/viewcontent.cgi?article=1206&context=eri.

(52.) Id. at 1.

(53.) See RENEE JOHNSON, CONG. RESEARCH SERV., LIBRARY OF CONG., NO. 7-5700, RECENT ACQUISITIONS OF U.S. MEAT COMPANIES 2 tbl.1 (2009), available at http://www.nationalaglawcenter. org/assets/crs/RS22980.pdf. "The proposed JBS acquisition of Five Rivers Ranch Cattle Feeding, which was part of the Smithfield deal, also took place, making JBS the largest cattle feeder in the United States." Id. at 2. Cargill Cattle Feeders, LLC, was ranked as the third largest cattle feeding company in 2006, marketing approximately 6% of the nation's fed cattle. Id. at 2 tbl.1.

(54.) Id.

(55.) See id.

(56.) Letter from Herb Kohl, Chairman, Subcommittee on Antitrust, Competition Policy and Consumer Rights, to Thomas Barnett, Assistant Attorney General (June 24, 2008), available at http://www.r-calfusa.com/Competition/080624SenHerbKohlLetter2DoJ.pdf.

(57.) Id.

(58.) Id.

(59.) See Johnson, supra note 53, at 2 tbl.1. The percentage was estimated by adding the post-merger market shares of JBS USA and Smithfield Beef Group to the market shares of Tyson Foods and Cargill Meat Solutions.

(60.) See generally Harlan Ritchie, What's Ahead for the Beef Industry?, BEEF MAGAZINE, Sept. 1, 2004, available at http://beefmagazine.com/mag/beef_whats_ahead_beef/. "Meanwhile, the top 30 cattle feeding companies account for about 40% of the fed cattle [in 2004]. That could be more than 50% by 2010." Id.

(61.) Id.

(62.) Nat'l Agric. Statistics Serv., supra note 21, at 16.

(63.) See id.

(64.) Johnson, supra note 53, at 2 ("The proposed JBS acquisition of Five Rivers Ranch Cattle Feeding, which was part of the Smithfield deal, also took place, making JBS the largest cattle feeder in the United States."); see also id. at tbl. 1 (Cargill Cattle Feeders, LLC, was ranked as the third largest cattle feeding company in 2006, marketing approx. 6% of the nation's fed cattle). Based on information and belief, Cactus Feeders, Inc., and Friona Industries, LP, which also are listed in Table 1 as among the largest cattle feeding companies, are considered captive feedlots and predominantly market their cattle to only one meatpacker.

(65.) Public Workshops Exploring Competition Issues in Agriculture: Livestock Workshop Before the U.S. Department of Justice and U.S. Department of Agriculture, 206, 210-11 (2010), available at http://www.justice.gov/atr/public/workshops/ag2010/colorado-agworkshop-transcript.pdf (statement of Jim MacDonald, Econ. Research Serv., U.S. Dep't of Agric.).

(66.) Id. at 210-12 (statement of Bruce Cobb, General Manager of Consolidated Beef Producers).

(67.) See Grain Inspection, Packers & Stockyards Admin., supra note 17, at 34 fig. 15.

(68.) See Grain Inspection, Packers & Stockyards Admin., supra note 16, at 50 tbl. 33.

(69.) Ward, supra note 50, at 1.

(70.) RTI INT'L, GIPSA LIVESTOCK AND MEAT MARKETING STUDY, VOLUME 3: FED CATTLE AND BEEF INDUSTRIES FINAL REPORT 5-4 (2007), available at http://www.gipsa.usda.gov/Publications/psp/1 ivemarketstudy/LMMS_Vol_3.pdf.

(71.) Id.

(72.) Oral Capps, Jr. et al., Examining Packer Choice of Slaughter Cattle Procurement and Pricing Methods, 28 AGRIC. & RESOURCE ECON. REV. 11, 21 (1999), available at http://ageconsearch.umn.edu/ bitstream/31491/1/28010011.pdf.

(73.) Id. at 15.

(74.) Id. at 16.

(75.) Id.

(76.) Id. at 15.

(77.) John R. Schroeter, Captive Supplies and Cash Market Prices for Fed Cattle: A Dynamic Rational Expectations Model of Delivery Timing 16 (Dep't of Econ., Iowa State Univ., Working Paper No. 07002, 2007), available at http://www.econ.iastate.edu/sites/default/files/publications/papers/p3863-2007-01- 18.pdf.

(78.) See KEVIN GRIER & LARRY MARTIN, GEORGE MORRIS CTR, SPECIAL REP.: BEEF PRICING AND OTHER CONTENTIOUS INDUSTRY ISSUES 1 (2004), available at http://ageconsearch.umn.edu/bitstr earn/18143/1/sr04gr02.pdf (providing an analysis of the live versus beef price disparity in Canada).

(79.) Letter from John Thune, Max Baucus, John Hoeven, Tim Johnson, Mike Enzi, Jon Tester, John Barrisso, and Kent Conrad, U.S. Senators, to Tom Vilsack, Agriculture Secretary (Oct. 17, 2012), available at http://www.thune.senate.gov/public/index.cfm/press-releases?lD=753ae86e-473f-42a4-a065-772e8ebf969b.

(80.) Id.

(81.) See Mingxia Zhang & Richard J. Sexton, Captive Supplies and the Cash Market Price. A Spatial Markets Approach, 25 J. AGRIC. & RESOURCE ECON. 88, 90 n.7 (2000), available at http://www.r-calfusa.com/industry_info/2008_JBS_merger/080409-Exhibit6_ZhangandSexton2000.pdf.

(82.) See Oral Capps, Jr. et al., supra note 72, at 16.

(83.) See id. at 16 tbl.1.

(84.) See id. at 21.

(85.) See RTI INT'L, supra note 70, at 2-36 (emphasis added).

(86.) See GRAIN INSPECTION, PACKERS & STOCKYARDS ADMIN., CAPTIVE SUPPLY OF CATTLE AND GIPSA'S REPORTING OF CAPTIVE SUPPLY 2 (2002).

(87.) See, e.g., infra Chart 2.

(88.) C. ROBERT TAYLOR & DAVID A. DOMINA, EVALUATING THE FARMER'S-SHARE-OF-THE-RETAIL-DOLLAR STATISTIC: REBUTTAL, available at http://www.r-calfusa.com/Competition/101105Ev aluatingFarmersShareofRetailDollarTaylor.pdf. Taylor and Domina discussed formula priced contracts:

   Distorted incentives for large packer-buyers with marketing
   agreements has been widely recognized by many economists since the
   advent of the "formula" by Tyson's CEO, Bob Peterson, and Paul
   Engler, Tyson's largest supplier and Tyson executive before
   becoming a feeder. Briefly, about 80% of captive agreements have a
   base price tied either to an announced USDA cash price the week
   before actual slaughter, or to an in-plant average price. For a big
   buyer this obviously distorts buying incentives, increasing the
   marginal cost of buying on the cash market.


Id. at 11.

(89.) Schroeter, supra note 77, at 4.

(90.) DAVID A. DOMINA LAW AND C. ROBERT TAYLOR, ORGANIZATION FOR COMPETITIVE MARKETS RESTORING ECONOMIC HEALTH TO BEEF MARKETS 6 (2010), available at http://ocm.srclabs.com/wp-content/uploads/2012/02/restoringbeefmarkets.pdf (citing C. Robert Taylor, The many faces of Power in the Food Systems, Presentation at DOJ/FTC Workshop on Merger Enforcement (2004)).

(91.) Id. at 6-7; see also Taylor, supra note 8, at 8.

(92.) See John M. Connor, The Changing Structure of Global Food markets: Dimensions, Effects, and Policy Implications 7-8 (Dep't of Agric. Econ., Purdue Univ, Staff Paper No. 3-02, 2003), available at http://ageconsearch.umn.edu/bitstream/28675/1/sp03-02.pdf.

(93.) See id.

(94.) Zhang & Sexton, supra note 81, at 97.

(95.) Id.

(96.) See RTI INT'L, GIPSA LIVESTOCK AND MEAT MARKETING STUDY, VOLUME 4: HOG AND PORK INDUSTRIES FINAL REPORT 2-12 tbl.2-3 (2007), available at http://archive.gipsa.usda.gov/psp/iss ues/livemarketstudy/LMMS_Vol_4.pdf. The percentage of market hogs procured through other captive supply arrangements is the stun of procurement or marketing contracts, forward contracts, and marketing agreements. Id. at 2-13.

(97.) Id. at ES-3.

(98.) Id. at ES-2 to -3 (emphasis omitted).

(99.) See RTI INT'L, supra note 70, at ES-4. The other captive arrangements are the sum of marketing agreements and forward contracts. See id

(100.) See id. at ES-5. The price discovery volume decreased from 62% in 2007 to 26% in 2012. Compare id. at ES-4, with supra Chart 2.

(101.) Id.

(102.) 315 F. Supp. 2d 1172 (M.D. Ala. 2004).

(103.) E-mail from C. Robert Taylor, Alfa Eminent Scholar and Professor of Agricultural and Resource Policy, Auburn University, to author (Jan. 16, 2008) (on file with South Dakota Law Review). See generally Pickett, 315 F. Supp. 2d 1172 (discussing captive supply transactions to acquire fed cattle for slaughter).

(104.) C. Robert Taylor, supra note 91, at 7 (citations omitted).

(105.) Id.

(106.) Id. at 9.

(107.) Id. (citations omitted).

(108.) AP Impact: Beef Industry Woes May Mean Poorer Meat, ASSOCIATED PRESS/NPR, Oct. 19, 2010, available at http://www.r-calfusa.com/in_the_news/2010/nl01019-impact.htm.

(109.) Id.

(110.) See id.

(111.) See id.

(112.) Bob Burgdorfer, Hitch in Cattle Deal with National Beef REUTERS, Jan. 21, 2010, available at http://www.agcanada.com/manitobacooperator/2010/01/21/hitch-in-cattle-deal-with-national-beef.

(113.) U.S. DOJ, COMPETITION AND AGRICULTURE: VOICES FROM THE WORKSHOPS ON AGRICULTURE AND ANTITRUST ENFORCEMENT IN OUR 21 ST CENTURY ECONOMY AND THOUGHTS ON THE WAY FORWARD 24 (2012), available at http://www.justice.gov/atr/public/reports/283291.pdf.

(114.) See LELAND SOUTHARD, ECON. RESEARCH SERV., USDA, LIVESTOCK, DAIRY AND POULTRY OUTLOOK 9 (2004), available at http://usda01.library.cornell.edu/usda/ers/LDP-M//2000s/2004/LDP-M-06-29-2004.pdf ("Given the present strength in the fed cattle market ... increased supplies of competing meats ... would push breakevens into the red quickly.").

(115.) See MILDRED M. HALEY, ECON. RESEARCH SERV., USDA, LIVESTOCK, DAIRY AND POULTRY OUTLOOK 8 (2006), available at http://usda01.library.cornell.edu/usda/ers/LDP-M//2000s/2006/LDP-M-01-19-2006.pdf ("Large supplies of competing meats at relatively lower prices, particularly broilers, are also expected to pressure beef prices...."); see also id. at 7 ("Improved grading prospects and larger numbers of cattle on feed will pressure the market, as will larger supplies of competing meats at relatively lower prices.").

(116.) Kuo S. Huang, Price and Income Affect Nutrients Consumed From Meats, FOODREVIEW, January-April 1996, at 37-38 (FOODREVIEW was replaced by AMBER WAVES following the Winter 2002 issue).

(117.) See Desmond A. Jolly, Reasons for the Decline in Beef Consumption, CALIFORNIA AGRICULTURE, May-June 1983, at 14-15, available at http://ucce.ucdavis.edu/files/repositoryfiles/ca370 5p14-70831.pdf (Desmond A. Jolly is an Economist, Cooperative Extension, and Adjunct Lecturer, Dep't of Agric. Econ., Univ. of Cal., Davis.).

(118.) GLYNN TONSOR ET AL., DEP'T OF AGRIC. ECON., KAN. STATE UNIV., U.S. BEEF DEMAND DRIVERS AND ENHANCEMENT OPPORTUNITIES (2009), available at http://krex.k-state.edu/dspace/bitstr eam/handle/2097/2606/BeefDemandDrivers2009.pdf?sequence=1.

(119.) James Mintert et al., Focus on Beef Demand, in MANAGING FOR TODAY'S CATTLE MARKET AND BEYOND 1-2 (March 2002), available at http://ag.arizona.edu/arec/wemc/cattlemarket/Focusonbeef demand.pdf.

(120.) Dillon Feuz, Improved Beef Demand Benefits Nebraska Cattle Producers, CORNHUSKER ECON., September 27, 2000, available at http://www.r-calfusa.com/Competition/091002%20Exhibit%2 05,%20Improved%20Beef%20Demand%20Benefits%20Nebraska%20Cattle%20Producers,%202000.pdf.

(121.) See Commodity and Food Elasticities: Demand Elasticities from Literature Results, USDA ECON. RESEARCH SERV., http://www.ers.usda.gov/data-products/commodity-and-food-elasticities/dema nd-elasticities-from-literature.aspx (using beef as the commodity and poultry as the cross commodity) (last visited Apr. 11, 2013).

(122.) $82.8 million was assessed in 2007.

(123.) See Combined Statement of Beef Checkoff Activities for the Fiscal Years Ended During 2007, 2006, 2005 and 2004, MYBEEFCHECKOFF.COM, http://www.beefboard.org/financial/files/State National%20Financials.pdf (last visited Apr. 11, 2013).

(124.) See Beef Checkoff Program Recognizes Top 20 Acomplishments Of 20 Years, MYBEEFCHECKOFF.COM (Sept. 25, 2006), http://www.beefboard.org/news/Release_2006_09_25_c.asp. The checkoff program advertised:

   Beef Nutrition. Checkoff-funded RESEARCH has confirmed that,
   calorie for calorie, lean beef packs a punch. A nutrition parity
   study between beef and chicken revealed that a 3-ounce cut of lean
   beef has, on average, only one more gram of saturated fat than the
   same size serving of a skinless chicken breast. After that, there's
   no comparison. That 3-ounce serving of lean beef delivers eight
   times more vitamin B12, six times more zinc and three times more
   iron than the chicken.


Id. (emphasis omitted).

(125.) See CATTLEMEN'S BEEF PROMOTION & RESEARCH BOARD, YOUR BEEF CHECKOFF 2006 BEEF BOARD ANNUAL REPORT 11 (2006), available at http://www.beefboard.org/uDocs/cbbannualreport200 6. "In 2006, increased placements and heavier carcass weights, combined with a significant supply of inexpensive poultry products and closed large export markets, make summertime beef promotion more crucial than ever." Id. (emphasis added.)

(126.) See Brief of Texas et al. as Amici Curiae Supporting Petitioners at 19, Johanns v. Livestock Mktg. Ass'n, 544 U.S. 550 (2005) (No. 03-1164, 03-1165), 2004 WL 1900729, available at http://www.beefboard.org/uDocs/Amicus%20briefs%20on%20merit%20-%20filed%20by%20state%20 AGs.pdf. The amici curiae stated: "Likewise, state beef councils cannot promote a message that disparages a competing product, such as poultry ... because the government--in contrast to the beef industry--has an interest in the success of competing agricultural sectors." Id.

(127.) See MARY HENDRICKSON & WILLIAM HEFFERNAN, DEP'T OF RURAL SOCIOLOGY, UNIV. OF MO., COLUMBIA, CONCENTRATION OF AGRICULTURAL MARKETS: APRIL 2007 (2007), available at http://www.foodcircles.missouri.edu/07contable.pdf.

(128.) See STEVE MEYER, CME GROUP, DAILY LIVESTOCK REPORT (2009), available at http://www.dailylivestockreport.com/documents/dlr%2009-02-09.pdf(Vol. 7, No. 169).

(129.) ARONA M. BUTCHER ET AL., U.S. INT'L TRADE COMM'N, U.S.-AUSTRALIA FREE TRADE AGREEMENT: POTENTIAL ECONOMYWIDE AND SELECTED SECTORAL EFFECTS 44 n.26 (2004), available at http://www.usitc.gov/publications/332/pub3697.pdf.

(130.) Dillon Feuz, The Economics of Carcass Weight: A Classic Micro-Macro Paradox in Agriculture, CORNHUSKER ECON., Mar. 20, 2002.

(131.) See ANIMAL & PLANT HEALTH INSPECTION SERV., USDA, ECONOMIC ANALYSIS FINAL RULE: BOVINE SPONGIFORM ENCEPHALOPATHY: MINIMAL RISK REGIONS AND IMPORTATION OF COMMODITIES 24 (2004), available at http://www.r-calfusa.com/BSE/041220EconAnalysisBSEFinalRule.pdf. See generally Bovine Spongiform Encephalopathy; Minimal-Risk Regions and Importation of Commodities, 70 Fed. Reg 460 (Jan. 4, 2005) (to be codified at 9 C.F.R. pts. 93-96).

(132.) See ECON. RESEARCH SERV., USDA, HISTORICAL PRICE SPREAD DATA FOR BEEF AND THE ALL-FRESH BEEF PRICE (last updated Feb. 21, 2013), http://www.ers.usda.gov/datafiles/Meat_Price_Spr eads/history.xls. To arrive at the live cattle price, select the "beef" tab and multiply the "gross farm value" for the given year by the ERS conversion factor of 2.4, which represents the number of pounds of live animal to equal 1 pound of retail beef. See id.

(133.) See Capps et al, supra note 72, at 15-16.

(134.) See Memorandum from R-CALF USA to GIPSA, Anticompetitive Practices Occurring in the U.S. Cattle Industry (June 30, 2009) (on file with South Dakota Law Review).

(135.) See id.

(136.) See Letter from GIPSA to R-CALF USA (July 10, 2009) (on file with South Dakota Law Review).

(137.) Affidavit from Bill Bullard, Chief Executive Officer R-CALF USA to GIPSA 7 (July 17, 2009) (on file with South Dakota Law Review).

(138.) Telephone Interview with Larry Mitchell, GIPSA Administrator (Dec. 5, 2012).

(139.) USDA-MO, DEPT. OF AG MARKET NEWS, NATIONAL FEEDER & STOCKER CATTLE SUMMARY-TWO WEEKS ENDING 07/13/2012 (2012), available at http://search.ams.usda.gov/mndms/2012/07/SJ_ LS85020120713.TXT (original before USDA scrubbing).

(140.) See, e.g., Feeder Cattle Review." Calf Prices Fell Before Holiday Break, DROVERS CATTLE NETWORK (July 13, 2012), http://www.cattlenetwork.com/cattle-news/markets/feeder-cattle/Feedercattle-review-Calf- prices-drop-8-15-lower-before-holida-162401246.html (an example of the publication of the original report in the agricultural trade press) (last visited Feb. 20, 2013); see also USDA-MO, DEPT. OF AG MARKET NEWS, supra note 139 (scrubbed USDA report with caption "correction to narrative").

(141.) See Jim Cote, DJ CME Cattle Outlook. Seen Down Slightly, Standoff Continues, DOW JONES NEWSWIRES, Feb. 17, 2006, available at http://www.r-calfusa.com/Competition/060217JimCoteDowJon esArticle.pdf ("the price standoff between cattle owners and beef packers continues into a third week.").

(142.) Lester Aldrich, DJ US Cash Cattle Pre-Open: Trading Standoff Continues, DOW JONES NEWSWIRES, Feb. 17, 2006, available at http://www.r-calfusa.com/Competition/060217LesterAldrichDowJonesArticle.pdf.

(143.) Cote, supra note 141.

(144.) Aldrich, supra note 142.

(145.) See DEP'T OF AGRIC. ECON., KANSAS STATE UNIV., LIVESTOCK & MEAT MARKETING: LIVESTOCK DATABASES (last visited May 1, 2013), http://www.agmanager.info/livestock/marketing/dat abase/default.asp# (select "Download" hyperlink from the row titled "Weekly Cattle Slaughter Data" in the "Cattle and Beef Databases" table). Column "D" in the spreadsheet includes the relevant category "FICATSLT," which represents federally inspected cattle slaughter.

(146.) See Weekly Dodge City Feeder Cattle and Western Kansas Slaughter Cattle Prices, Cattle and Beef Databases, AgManager info, Kansas State University, available at http://www.agmanager.info/livestock/marketing/database/default.asp#Cattle and Beef Databases (Column "K" in the spreadsheet includes the relevant category "DCST1113," which represents Dodge City Steers weighing 1, 100-1,300 lbs.)

(147.) See National Beef Cuts Hours at Two Kansas Plants, KANSAS CITY BUSINESS JOURNAL, Oct. 10, 2006, available at http://www.bizjournals.com/kansascity/stories/2006/10/09/dailyl2.html; Bob Burgdorfer, Struggling U.S. Beef Industry Cuts Production, R-CALF USA (Oct. 10, 2006), http://www.r-calfusa.com/industry_info/2008 JBS merger/080409-Exhibitl2_ReutersTysonCutsBack.p df (archived from Reuters); Swift to Stay with Reduced Production at U.S. Facilities, R-CALF USA (Oct. 10, 2006), http://www.r-calfusa.com/industry_info/2008_JBS_merger/080409-Exhibitl3_Meatpou ltrySwift.pdfMeatpoultry.com (archived from meatpoultry.com).

(148.) See Livestock Market Briefs, R-CALF USA (Oct. 13, 2006), http://www.r-calfusa.com/industry info/2008_JBS_merger/080409-Exhibit14_BrownfieldAgNetworkOct132006.pdf (archived from Brownfield Ag Network).

(149.) See id.

(150.) See Livestock Market Briefs, R-CALF USA (Oct. 20, 2006), http://www.rcalfusa.com/industry_info/2008_JBS_merger/080409-Exhibitl5_BrownfieldAgNetworkOct202006.pdf (archived from Brownfield Ag Network).

(151.) See id.

(152.) See supra Part II.B.2.ii.

(153.) SPARKS COS. INC., supra note 2, at 40.

(154.) Id. at 22.

(155.) Id. at 24.

(156.) WILLIAM HAHN, ECON. RESEARCH SERV., USDA, BEEF AND PORK VALUES AND PRICE SPREADS EXPLAINED 4 (May 2004), available at http://naldc.nal.usda.gov/download/38951/PDF (citation omitted).

(157.) See id. at 2.

(158.) Id.

(159.) Id. at 3.

(160.) Id. at 2.

(161.) See infra Chart 5.

(162.) HAHN supra note 156, at 8.

(163.) ld. at 3.

(164.) ld.

(165.) See id. at 10.

(166.) See ECON. RESEARCH SERV., USDA, DATA SETS, HIGH PLAINS CATTLE FEEDING SIMULATOR (last updated Aug. 27, 2012), http://www.ers.usda.gov/data-products/livestock-meat-domestic-data.aspx (select "High plains cattle feeding simulator" hyperlink, then refer to "Net margin").

(167.) See ECON. RESEARCH SERV., USDA, BEEF VALUES AND PRICE SPREADS (last updated Feb. 21, 2013), http://www.ers.usda.gov/datafiles/Meat_Price_Spreads/beef.xls.

(168.) U.S. GEN. ACCOUNTING OFFICE, supra note 46, at 30.

(169.) Id.

(170.) MATHEWS, supra note 15, at 3.

(171.) INTERAGENCY AGRIC. PROJECTIONS COMM., OFFICE OF THE CHIEF ECONOMIST, USDA, WAOB-2002-1, USDA AGRICULTURAL BASELINE PROJECTIONS TO 2011 (2002), available at http://usda.mannlib.cornell.edu/usda/ers/94005/2002/waob-2002-1.pdf.

(172.) MILDRED M. HALEY, ECON. RESEARCH SERV., USDA, LDP-M-162, LIVESTOCK, DAIRY, & POULTRY OUTLOOK 5 (Dec. 2007), available at http://usda01.1ibrary.cornell.edu/usda/ers/LDPM//2000s/2007/LDP-M-12-19- 2007.pdf.

(173.) HALEY, supra note 38, at 14.

(174.) Id.

(175.) McBride & Key, supra note 38, at 8.

(176.) Cattle & Beef: Background, supra note 47.

(177.) Letter from Bruce Bass, Senior Vice President, Cattle Procurement, and Gary Machan, Vice President, Hog Procurement, IBP, Inc., to Producers (March 2003); see also Cong. Rec. S14,114 (daily ed. Nov. 6, 2003) (statement of Sen. Talent).

(178.) Id.

(179.) See 149 Cong. Rec. S14,114 (daily ed. Nov. 6, 2003) (statement of Sen. Talent).

(180.) Mandatory Country of Origin Labeling of Beef, Lamb, Pork, Fish, Perishable Agricultural Commodities, and Peanuts, 68 Fed. Reg 61944 (Oct. 30, 2003) (to be codified at 7 C.F.R. pt. 60).

(181.) See Nexus Mktg., Muscle Scoring Provides Important Production Tips 1 (2008), available at http://www.r-calfusa.com/industry_info/2008_JBS_merger/080409-Exhibit9_MuscleScoring.pdf.

(182.) See id.

(183.) RTI INT'L, supra note 70, at 2-39.

(184.) Id. at 5-10, 5-11.

(185.) See id. at 1-15 (explaining that grids offer premiums and discounts based on carcass grade classifications).

(186.) Id. at 5-2, 5-3.

(187.) See id. at ES-3 ("88% of large packers purchased cattle based on carcass weight with grids"); see also id. at ES-4 ("Packers in the West purchased more than half of their cattle using carcass weight with grid valusation, while packers in the High Plains and CombeR/Northeast used this valuation method for 42% and 44% of their purchases, respectively.").

(188.) Cattle Terms and Conditions, TYSON (Jan. 3, 2011) http://www.tysonfoods.com/Business-toBusiness/Forms-and- References/Cattle-Terms-and-Conditions.aspx.

(189.) Id.

(190.) See supra Part II.A.2.

(191.) See, e.g., MO. DEP'T OF AGRIC. MARKET NEWS SERV., USDA, NATIONAL FEEDER & STOCKER CATTLE SUMMARY--WEEK ENDING 10/30/2009 (2009), available at http://search.ams.usda.gov/mndms/ 2009/10/SJ_LS85020091030.TXT ("Nearly 800 loads of CME Live Cattle deliveries at the northernmost delivery points helped pull the cash market from a 3.00 discount to an eventual near 6.00 premium after October live cattle closed limit down on Friday's final session.").

BILL BULLARD ([dagger])

([dagger]) The author is a former cow/calf rancher from Perkins County, South Dakota; former executive director of the South Dakota Public Utilities Commission; and now serves as the chief executive officer of Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America ("R-CALF USA"). On behalf of R-CALF USA, the author has testified on the need for antitrust enforcement in the U.S. cattle industry before the U.S. Senate Committee on the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights as well as on the need for cattle futures market reforms before the U.S. House Committee on Agriculture Subcommittee on General Farm Commodities and Risk Management. The author expresses his sincere appreciation to all the hard-working men and women in the U.S. cattle industry who steadfastly refuse to surrender their competitive markets despite overwhelming industry pressures to do under the guise of creating efficiencies and for all the professional literary assistance provided by the faculty and staff of the South Dakota Law Review in the preparation and presentation of this article.

Chart 1
Loss of U.S. Livestock Operations 1980-2012

       Beef Cattle    Swin      Diary     Sheep

1980    7272.350     887,000   335,270   120,000
2012     729,000     60,200    58,000    79,500

Source: USDA-NASS

Type of Livestock Operations

Chart 2

National Breakdown by Purchase Type

                    2005    2006    2007    2008    2009    2010

Cash                52.1%   49.4%   47.3%   42.6%   38.8%   37.4%
Formula             33.2%   34.3%   37,4%   39.1%   43.7%   43.1%
Forward Contract    4.8%    7.2%    6.8%    11.2%   9.5%    11.9%
Negotiated Grid     9.9%    9.0%    8.5%    7.1%    8.0%    7.6%

                    2011    2012

Cash                32.6%   26.0%
Formula             47.4%   54.8%
forward Contract    13.2%   12.0%
Negotiated Grid     6.7%    7.2%

Source: USD A Market News
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Title Annotation:II. Exercising Market Power B. The Processes of Vertical Integration 3. Acquisitions of Product Substitutes ii. Foreign Product Substitutes through Summary and Conclusion, with footnotes and tables, p. 587-610; Antitrust and Competition in America's Heartland
Author:Bullard, Bill
Publication:South Dakota Law Review
Date:Sep 22, 2013
Words:15301
Previous Article:Under siege: the U.S. live cattle industry.
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