Jury Rules for Cattle Farmers in Tyson Case
Tyson Foods Inc., the world’s largest meat processor, must pay $1.28 billion to cattle ranchers, according to a federal jury verdict Tuesday that said the firm manipulated the cattle market and would have to change its buying practices.
The ruling by the Montgomery, Ala., jury in the 8-year-old case could have a far-reaching effect on the $70-billion U.S. beef industry.
“It means the cattle business has a real chance to remain in the hands of independent producers, and not fall solely to contract growers controlled by integrated slaughterhouse com- panies,” said David Domina, the plaintiffs’ lead attorney.
He said the jury found that Tyson manipulated cash cattle prices downward between Feb. 1, 1994, and Oct. 31, 2002.
Springdale, Ark.-based Tyson said it would ask the judge to set aside the verdict and would appeal the decision if the judge did not act. The verdict should not affect the company’s operations or liquidity.
“The verdict is a disappointment to our company and thousands of cattle producers who want to maintain the right to market cattle the way they want,” Tyson said.
California’s 5,000 cattle ranchers have stood largely on the sidelines of the dispute. Tyson said it bought 10,000 head of cattle directly from California ranchers annually, a tiny fraction of the roughly 10 million animals it processed each year.
The Alabama case dates back to 1996, when IBP Inc., now a Tyson unit, was sued by the plaintiffs, who accused the company of controlling large supplies of cattle that kept cattle prices low.
“I think we proved that Tyson used contract, or what’s called captive supply, to depress the cattle market,” said Randy Beard, an attorney for the plaintiffs. Up to 30,000 cattle producers could be affected, Beard said.
The lawsuit was filed under the Packer and Stockyards Act, a 1921 law passed in response to the concentration of the U.S. beef packing industry among five dominant companies.
Cattle producers have complained that the concentration in beef packing was even more intense now, with giants Tyson Foods, Cargill Inc.’s Excel unit and Swift & Co. leading the market. Producers say the use of captive supplies gives plants greater leverage when negotiating prices on spot markets.
Cattle marketing agreements became popular in the mid-to-late 1980s as meat plants developed products that required consistently sized beef cuts. Up to 45% of all grain-fed cattle now are sold under such pacts.
“It helps them guarantee a supply of cattle to their plants at some regular time schedule and to help them control the quality of cattle through those plants,” said Clement Ward, agricultural economist at Oklahoma State University.
Outlawing captive supplies could be disruptive to the industry, he added, if done all at once.
Tyson shares fell 17 cents to $16.21 on the New York Stock Exchange.
