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By David Bowser AUSTIN — An Alabama jury verdict in a class action lawsuit against IBP earlier this year remains a hot topic of conversation in the cattle industry. In February, the five-man, seven woman jury in Montgomery, Ala., reached the conclusion that IBP, now Tyson Fresh Meats, a wholly owned subsidiary of Tyson Foods, used captive supplies to manipulate the live cattle market. The judge in the case has yet to enter a judgment in the case, but this month he ruled that the $1.2 billion damage figure the jury proposed was excessive. The impact of the case was brought up before a marketing panel at the recent Texas and Southwestern Cattle Raisers Association convention here. Jay O'Brien, a rancher and cattle feeder from Amarillo, indicated that he has mixed feelings about packers. When the packers buy his cattle at low prices, he's less than thrilled, but when he gets a higher price for his cattle, he's happy. His concern is with the next phase of the case that has yet to come to trial. The cattlemen who sued IBP are seeking an injunction to ban packer ownership of cattle. "People want to keep packers out of the feeding business," O'Brien said. "Why do we think one group can get in, but another group can't? It doesn't make sense. Everyone should compete on a fair basis. I think the fair basis is the key point." How ever the judge finally rules, O'Brien said he thinks the cattle market will be different. "Regardless of what comes out," he predicted, "we probably will change for a while the way we buy cattle. I think it's incumbent on us to see that the change will be for the better." Whether the final ruling is considered good or bad by different groups in the industry, O'Brien said cattlemen need to figure out how to deal with the judge's decision. "If we have packers barred from entering alliances, then we should figure out an efficient way that we can provide them in the spot market the type of beef they need," O'Brien continued. "I think we can do it. I think they can do it if they have the guts to do it." With a grin, O'Brien said he has to be careful about what he says because he goes quail hunting with people from the packing industry. "I'm going to be around them when they have guns," he quipped. O'Brien recalled talking with a packer several years ago. The packer was going on and on about how stubborn producers were and how they wouldn't provide the right product. O'Brien said he finally told the man that he was right. "We're like a lot of mules," O'Brien told the packer. "When I was a kid they still had a wagon on the ranch in New Mexico." The wagon was pulled by mules, and they would get distracted. "They tended to go off on tangents," he said. "We had to put blinders on them." Pulling a couple of dollar bills out of his wallet, O'Brien continued. "These packers should recognize that we're mules," O'Brien said as he pulled off his glasses and put a dollar bill on each side of them. "Cattlemen work with blinders." Putting his glasses back on with the dollar bills shading each side, O'Brien continued talking. "Strangely enough," he said, "we work well with green blinders." O'Brien opined that if packers would put green blinders on the producers like the ones on his glasses, cattlemen would go the direction the packers wanted to go. The greener the blinders, O'Brien said, the better the cattlemen will work. Mike Heard, general manager of Cattle Town Feeders Inc., near Hereford, indicated he thinks little of the lawsuit, though he hears a lot about packer concentration. Heard said over the last couple of years, he's seen a lot of feedyards change hands in the Texas Panhandle. "I don't recall the last time I saw a packer buyer purchase one," Heard said. Despite the people being forced out of cattle feeding, the industry continues. "There's always someone willing to come back in there," Heard said, "and buy the feedyard." He questioned placing controls on what the packer can and can't do. "From the feedyard's perspective," Heard said, "maybe it's a valid argument, but the other part is if you were me, the other guy is usually a cow-calf guy, you're saying we won't let people out there compete for our cows. It's never made any sense." Early in his career, Heard said, he worked for Caprock, which is part of Cargill, the target of a similar lawsuit. Heard said he doesn't have anything but respect for Caprock, but he thinks he can do things more efficiently than they can. "That's one of the reasons I went into an independent environment," Heard explained. "I believe in free enterprise. It doesn't bother me who I'm competing against. I don't see this as being a factor that's going to get us closer to increasing demand one way or the other." Ken Bull, vice president for cattle procurement with Cargill Meat Solutions-Excel, said packers are already limited by regulations. "I doubt if there's any industry in agriculture that's regulated as much as the packing industry," Bull said. "We've got FSIS (USDA’s Food Safety Inspection Service) in one part of our plant making sure that food safety is at high standard and labeling is being done properly. We've got government graders in another part of our business that are grading the animals. We've got market reporting that we do on a mandatory basis. We have those mandatory market report audits that take place to ensure the integrity of the market data we send in. We have the Packers and Stockyards Administration, which is the official branch overseeing us and regulating us from the standpoint of trade and market price. I think if you believe there needs to be more, then you probably ought to get a packing plant and see if that's really where you want to go." He said he's always been intrigued that those who want more regulation of someone else are the staunchest defenders against regulations in their own industry. "That may be a telling point," Bull said. He said packers have a number of different agencies regulating them, and the regulators have access to anything and everything on an on-going basis. "They have all of our agreements," Bull said. "They get all of our price data. They get all of our agreement details. It's to the point where most of the time, we'll go to the Packers and Stockyards Administration and sit down with them and talk about marketing alternatives that we're about to change and see if they have a problem with it." It's a highly regulated industry, he insisted, one that has people looking over their shoulders all the time. "It's to the point where we tend to kid them and tell them they need to get an office right inside our business and get a computer terminal and go on about their business," Bull said. As far as the operation of the packing plants is concerned, Bull said that can vary significantly, depending upon the plant. "Obviously, we have a pretty big difference in plants in Texas. We process about 9500 to 9600 head a day in our Texas plants. We have plants in Kansas, Colorado, Nebraska. We try to tailor the branded programs to the cattle that are coming in. We have more of our CAB and Sterling programs situated in the northern plants. We get a higher percentage of those animals coming into those plants. In the southern plants, we get a lesser percentage of the premium animals, so we went to creating a brand that was more specific to the cattle in this region. More Select and low Choice type cattle." A lot of the cattle go into branded products because that means more money for them. "On a company basis," Bull said, "probably 35 percent of our carcasses, maybe at times 40 percent of our carcasses, are eligible to get into a brand." But the brands don't always take the entire animal, he pointed out. "Our goal is to get those percentages at a higher level, yet it is a balance between ensuring that we're able to meet the commitments to that retailer and have the supply stream coming in the front," Bull said. "We get some off these cattle that go into a brand from the spot market. We have a number of alliances and supplies of cattle specifically earmarked to specific brands." |
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