Date: February 23, 2004
FOR IMMEDIATE RELEASE
Contact: Steve Cady, 402-792-0041
Pickett Trial Showed Captive Supplies Reduced Market Access and Choice
Lincoln, NE ~ The Organization for
Competitive Markets said today that the Pickett v. Tyson Fresh Meats, Inc.
(formerly IBP) trial revealed that Tyson’s captive supplies reduced market access,
while dramatically limiting or eliminating competitive bidding choices for
thousands of cattle owners. During the
trial, Tyson’s attorneys argued that having many ways to sell to Tyson is beneficial. But the jury found that Tyson was creating an
illusion of choice, while actually depressing market prices and reducing real competitive
bid choices offered by packers.
“The Pickett trial showed that as
captive supplies increased, market access and competitive bid choices for the
vast majority of cattle owners actually declined,” said Fred Stokes, OCM
president. “Tyson certainly tried to
convince the jury that these arrangements produced more choice. But it was clear that ‘choice’ was an
illusion manufactured by Tyson and its lackeys for years. The reality is that Tyson choked off market
access with these deals, and then benevolently allowed a way out. Producers would be permitted to sell to
Tyson if they would commit cattle months ahead of time outside the open market
because of market closure.”
Tyson spent much attorney time
trying to persuade a skeptical jury that it was merely offering a service in creating
so many ways that producers could sell captive cattle to Tyson while avoiding
the cash market. “Captive supplies,” as
defined by the court, included all cattle committed and delivered to Tyson
outside a seven day window. Spot or
cash sales included live weight sales, in-the-beef sales, and negotiated base grid
sales so long as commitment and delivery were within seven days.
However, the evidence showed that
Tyson, 10 to 15 years ago, began cutting very favorable deals with some feeders
to lock up inventory. These yards
included Cactus, Simplot, CattleCo, Beef Marketing Group, Pioneer Feeders and
others. The favorable deals did not
make economic sense to Tyson except to facilitate price manipulation. Tyson’s records revealed that captive cattle
were of lower quality than cash market cattle.
“The preferential captive supply deals
started a market destroying cycle,” said Steve Cady, executive director of
OCM. “Tyson could pull out of the cash market
and destabilize it. Then it would offer
more ‘marketing alternatives’ as the remedy for the problem it was creating in
the cash market. As it enticed more producers
to use its remedy (captive deals), the disease kept getting worse. The disease is a dysfunctional cash market
caused by the captive supply treatment.
This is what ‘choice’ means in the wonderful world of Tyson.”
“Tyson’s head cattle buyer admitted
on the stand that he sets the national price paid by Tyson every day,” said
Stokes. “He also said that when he has
more captive supply inventory, the price he sets is lower. The head buyer’s only job at the company is
to buy cattle cheap – that is how his job performance is rated.”
“The New York Attorney General fined
financial traders for engaging in preferential stock trades with their mutual
fund buddies after the market closed, causing hundreds of million of dollars
harm to mutual fund investors,” continued Stokes. “Those perpetrators are paying criminal penalties. In the cattle markets, however, some
continue defending their right to ‘choose’ to manipulate price at the expense
of competitive and efficient markets.”
The Organization for Competitive Markets is a nonprofit
organization working for fair, open and competitive markets for farmers,
ranchers and rural communities. OCM
helps lead the Cattlemen’s Competitive Market Project which is a voluntary
contribution program focusing on competition in the cattle markets.