Cattle feeders representing all cash sellers of fed cattle through ConAgra, and its successor Swift, and against Excel, a Cargill subsidiary, await court ruling on important class action motions. Two suits, filed by David Domina and Nora Kane of Domina Law Group, Herbert Schwartz of Houston, Joe Whatley and Peter Burke of Whatley Drake, Birmingham, Alabama, challenge America’s second and third largest cattle slaughterhouses.
The suits allege that ConAgra and Excel used market power, and their role in the highly concentrated beef slaughter industry, to forward contract cattle, reduce cash markets to thin trading, and downwardly depress cash prices paid to feeders. The suit alleges that this practice violates 7 USC § 192, a provision of the little used, but very important Packers & Stockyards Act of 1921. The 1921 act was passed to protect meat producers from anti-competitive actions by slaughter companies.
The suits against ConAgra (Swift) and Excel are not Domina Law’s and Whatley Drake’s first involvement in this area. These lawyers, now joined by Schwartz of Houston in the ConAgra and Excel cases, have won certification of a national class action for sellers of fed cattle against IBP, inc. Picket v. IBP, inc. is set for trial in January 2004.
“These three cases all challenge the problem of forwarding contracting for commodity products in highly concentrated agricultural markets,” said David Domina. As a number of foods processors have rapidly diminished through consolidation, the nation’s meat and fiber producers – from cattlemen to grape growers – find themselves with virtually no market alternatives, and almost no ability to negotiate a price. For many of America’s foods producers, the markets have become “take it or leave it” propositions, Domina explains.
All three suits against the beef slaughter companies are assigned to Hon. Lyle Strom, Senior U.S. District Judge, Omaha. The Pickett case will be tried in Alabama. The ConAgra and Excel suits are filed in Nebraska.
“Nebraska is, perhaps, the least overtaken area in the country by the contracting phenomenon,” Domina said. Here, cattlemen seemed to have resisted committing their cattle to slaughterhouses longer than in other places.
In some areas of the country, huge fractions of overall cattle procurement now occurs strictly through use of “captive supplies.” These are arrangements in which cattle feeders commit their cattle for sale to a particular slaughterhouse long before they are ready for delivery. The effect of these captive supply arrangements tends to be lowered cash prices, lower margins, and a significant reduction in the number of cattle producers for the region. “Captive supplies drive out smaller producers,” Domina said.