Our guest is a Dr. Roger McEowen, who is a Kansas Farm Bureau Professor of Agriculture Law and Taxation at the Washburn School of Law in Topeka. Roger, thanks for being with us. One subject we wanted to get your expertise on, and that’s what’s going on of what we’re seeing in the cattle markets. There’s a lot of discussion of research and other things being done in DC to try to figure out why we saw such huge disparity not only a year ago after the fire at Holcomb but recently in why box beef prices are so high and what the farmers and ranchers are receiving cash-wise from the big packers. Some are crying this is an antitrust violation.
Dr. Roger McEowen: This is, as I pointed out in a recent article that I wrote and posted on my blog, this is an issue that has been characteristic of the cattle market and in the packing industry since 1888. We’re going back 132 years, where Congress expressed the same concerns that we’re hearing today about pricing practices amongst the major packers. We still have high concentration levels amongst the four largest beef processors, just like we did 132 years ago. That’s just the names have changed. We had five then that controlled the market. We’ve got the four largest ones right now that control 80% of the US beef processing in this country.
As you said on box beef prices, according to the USDA box beef prices have recently more than doubled while at the same time your live captive cattle prices have dropped about 20% over the same timeframe. That raises some concerns, particularly from those that aren’t necessarily well schooled in economics. Even those that are trained in economics, the levels of market concentration do raise some concerns. It allows for, I’m not saying it’s occurring, but allows for the possibility of price manipulation. I would just say there’s nothing sinister, in and of itself, about a packing plant having large margins because of an inability of the industry to process the available supply. There’s nothing sinister in that.
The plants didn’t shut down because of price manipulation this current time. They shut down because the workers were showing up sick. I won’t say that they got sick at the plant because I don’t believe that’s knowable or not. There’s no duty on the part of meatpacking plants to overpay producers to acquire a product. That’s a fundamental principle here that we have to keep in mind. Now, that doesn’t answer the question as to whether there’s price manipulation going on that’s a violation of the Packers and Stockyards Act. That’s a separate issue that’s out there. I think you have two issues that are involved.
Ken Rahjes: We’re talking to Roger McEowen, the Agriculture Law Professor at the Washburn School of Law. Let’s take a break, and we’ll talk more about this topic in just a moment.