To hear Tyson Foods tell it, the Feb. 17 jury decision that drained $1.28 billion in damages from its corporate coffers for undercutting competition in cash cattle markets was disappointing, wrong, unfair, short-sided, silly, temporary and wildly harsh for a company simply “caught in the middle.”
Tyson is wrong on all points except that last one.
Milestone case. After buying IBP, the nation’s largest cattle killer for $2.9 billion in 2001, it was caught dead – and dead wrong – in the middle of what is being called the most important event in U.S. livestock history since the passage of the Packers & Stockyards Act of 1921.
In short, when Tyson bought IBP it also bought into Pickett vs. IBP, a 1996 civil lawsuit that alleged IBP was using its market clout to reduce prices paid for cattle not already in IBP’s pocket through direct ownership or contract purchase agreements.
If the world’s biggest chicken plucker was worried, it never let on.
Unanimous decision. Until Feb. 17 anyway, when an Alabama jury in the federal suit plugged it for a billion-and-change.
Then Tyson squawked like a hen headed for a beheading. It called the unanimous jury decision “only a temporary setback;” the $1.28 billion penalty an “advisory” award; and the cowboy plaintiffs low-down “activists.”
Poor, poor Tyson. The Alabama jury only did what its buddies at the USDA, the market’s legal protector, and friends at the National Cattlemen’s Beef Association, the industry’s self-proclaimed protector, failed to do for years.
It took an impartial look at the cattle market and declared it a manipulated, stinking mess.
By the numbers. In trial testimony, Auburn University ag economist C. Robert Taylor put a figure on what the manipulation cost cash cattle sellers.
According to Taylor, for every 100,000 head of captive supply cattle slaughtered by Tyson – estimated at half the 9.5 million head of cattle it slaughters each year – the packer sliced $5.62 per hundredweight off the price it would have paid in a fair, transparent market.
That means between early 1994 and late 2002, the period covered in the lawsuit, calculated Taylor, Tyson-IBP extracted $2.1 billion out of the hide of cattlemen who sold it cattle not under the control of Tyson.
Numbers stand test. During the trial, Tyson attorneys called witnesses they said would impugn Taylor’s numbers and plaintiffs’ claims that it was abusing the market.
Almost every witness, however, provided evidence supporting the cattlemen rather than Tyson.
For example, in explaining how Tyson used contract cattle to keep its kill lines humming, Bruce Bass, the company’s beef-buying boss, admitted Tyson often had more cattle lined up for slaughter than it could stuff through its plants.
When that happened, Bass confessed, he ordered Tyson’s 75-or-so cash market buyers to lower the price the firm offered spot market cattle sellers.
Tyson also argued that its procurement contracts were crucial in ensuring it killed enough high quality cattle to meet the needs of its meat-buying customers. Economist Taylor chopped up that claim with the company’s own data which showed Tyson actually bought 10 percent more high quality cattle on the open market than it did through its closed, formula-priced contracts.
‘Markets are rigged.’ Johnny Smith, a South Dakota cattleman and one of the plaintiffs, says he wasn’t surprised by Tyson’s stumbling performance in court.
“We knew we could win if we got the facts before a jury of our peers,” says Smith. “All we did was show what every cattleman has known to be true for years – today’s cattle markets are rigged.”
And that’s exactly what happened.
Perhaps even more remarkably, the cattlemen won without USDA or NCBA lifting one finger to help at any point in the eight years it took the lawsuit to wind through the courts.
Not surprising, neither USDA nor NCBA would comment on the jury decision.
Which, to most cattlemen, only proves another long-held belief among red meat producers: If you toss Tyson – or, for that matter, any meatpacker – in a sack with USDA and NCBA and then roll it down a hill, there would be a chicken on the top all the way down.
(The author is a freelance ag journalist who lives in Delavan, Ill. He can be reached via e-mail at: AGuebert@worldnet.att.net. Read his columns online at www.farmanddairy.com.)
© 2004 ag comm
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