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Possible Beef Price Fixing

Iowa Senator Charles Grassley is among some farm-state senators who are calling for investigations of beef packing companies following the surge in wholesale beef prices that led to extreme processing profit margins. Texas Congressman Mike Conaway told AgriTalk Tuesday he thinks a probe into packer profits is likely.

Cattlemen have complained that surging meat prices due to the COVID-19 crisis hoarding did not translate into higher cattle prices. During the crisis, CME futures prices plunged lower along with the stock market, but wholesale beef prices rose 22% to a peak near $257 per cwt.

The combination of peak wholesale prices and lower cash cattle prices saw estimated packer margins at $510 per head the week ending March 20, and climbing to $555 per head the week ending March 27, according to the Sterling Beef Profit Tracker.

Senator Grassley wrote on Twitter that the U.S. Department of Agriculture, Department of Justice and Commodity Futures Trading Commission probes may be needed to determine why ranchers did not benefit from soaring meat demand.

"Beef is flying off grocery shelves but farmers are seeing prices go down," Grassley said. "If packers are illegally manipulating markets during the crisis, we need USDA & DOJ & CFTC to investigate + help farmers. Four companies control 80% of the market & they're taking advantage."

Four U.S. Senators from South Dakota, North Dakota, and Montana sent a letter to the Justice Department calling for a price-fixing investigation, according to a Reuters report.

In an AgriTalk interview with host Chip Flory on Tuesday, Conaway, representing Texas’ 11th district, said he believes there will be an investigation.

“We've got a regulatory scheme in place that is constantly looking for this issue,” Conaway said. “Some of this disruption is generally new. I mean, Americans got 54% of their food through restaurants before this event. And now that has switched. Grocery stores are buying more meat and restaurants are buying less meat. How the distribution system reacts to that, in the short-term, may be part of what’s going on.”

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