Cattlemen sue packers – ‘a line in the sand’

Published Saturday
May 11, 2002

Cattlemen sue packers – ‘a line in the sand’

LINCOLN – A group of Midlands cattlemen filed class-action lawsuits Friday claiming that the meatpacking divisions of ConAgra Inc. and Cargill Inc. have used contracts and ownership of livestock to depress the cash cattle market.

The lawsuits, filed in U.S. District Court in Lincoln, allege that the nation’s second- and third- largest beef packers have violated the Packers and Stockyards Act of 1921 by engaging in monopolistic practices.

“I finally decided it was time to draw a line in the sand,” said Jack Boehler, 70, who operates Harlan Feeders Inc., a feedlot near Orleans in south-central Nebraska. Boehler is a plaintiff in the lawsuit against ConAgra.

Said Gordon Reisinger of Red Oak, Iowa, one of the plaintiffs against Excel, a division of Cargill: “We are not doing this for financial gain. We are trying to preserve a fair way to do business.”
Spokesmen for the two packing companies said they had not been informed of the lawsuits.
“Until we’ve seen the document,” ConAgra spokesman Jim Herlihy said, “it would be premature for us to comment on it.”

Mark Klein, communications director for Excel, said there have been numerous studies on the effect of captive supplies. “None have shown captive supplies to be tools for market manipulation,” Klein said.
The lawsuits address one of the most contentious issues in agriculture today: whether contracting in advance to sell cattle squeezes profits from the cash sellers.
A hotly debated proposal to ban packer ownership of livestock prior to slaughter was ultimately rejected before Congress adopted a new farm bill this week.

“That was not the end of the controversy,” Iowa State University economist Neil Harl said. “It is clear that the issue is important and resonates with producers throughout the country. It is clear there is going to be continued pressure, legally and legislatively.”

If accepted by the court, the “class” involved in the two Nebraska cases would include only cattlemen who sell the traditional way, by taking bids from buyers on a weekly or even daily basis. Many of these sellers contend that as packers control more of the slaughter supply, they bid less aggressively on the remaining cattle.

But even economists can’t agree on the issue.

Eight university economists reported earlier this year that more than 35 percent of cattle are sold to packers through some kind of advance arrangement. But the economists said the negative impact was minimal.

Another group of university economists, including Harl, followed with its own reports concluding that captive supplies were cutting into the profits of independent sellers.
“Even academics can disagree,” Harl said.

Studies by the U.S. Department of Agriculture have concluded that the impact captive supplies have on market prices is not enough to trigger government intervention.
The Lincoln lawsuits are similar to one filed in Alabama against IBP Inc., the nation’s largest packer. Class-action status was granted in that case over the objections of IBP.
IBP, headquartered in Dakota Dunes, S.D.; Omaha-based Con-Agra and Excel of Wichita, Kan., slaughtered about 72 percent of the nation’s fed steers and heifers in 2000, according to Cattle Buyers Weekly, an industry newsletter.

Beef slaughtering plants operated by the defendants in the Nebraska lawsuits include ConAgra’s plants in Grand Island, Neb., and Omaha; and Excel’s plant in Schuyler, Neb. Neither company operates beef packing plants in Iowa.

If the lawsuits are successful, they could lead to compensation for alleged losses going back four years for about 15,000 independent cattle producers.

“Actual damages would depend upon what proof they have and can develop as to pricing that was discriminatory,” Harl said. “This is difficult to do.”

The cattlemen also asked for an injunction to stop the packing companies from owning cattle or contracting for them in advance.

Domina said the IBP lawsuit in Alabama is the first class-action suit to go forward in the 81-year-history of the Packers and Stockyards Act.d ownership to depress cash prices. An Excel spokesman said the lawsuits had no merit.

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