Market, not manipulation, caused lamb slump, USDA finds
An investigative report by the USDA has found that market conditions, rather than packer manipulation, was responsible for the slump in lamb prices.
Manipulation by meat packers was not a factor in the lamb price slump in 2012 and much of 2013, according to USDA.
The agency’s Grain Inspection, Packers and Stockyards Administration has concluded that price swings were caused by changing market conditions.
Prices for lamb spiked in 2011 due to a global shortage of the meat but then plummeted as it became too expensive for retailers and consumers, according to an agency report.
The USDA received complaints that packers prioritized slaughtering their own lambs, effectively forcing other lambs to grow older and less desirable.
However, the agency’s investigation found that “packers processed their own lambs at weights that were heavier than or as heavy as lambs they purchased from other sources,” the report said.
This fact was confirmed by carcass weight data reviewed by the USDA as well as statements from producers who contracted to feed the packers’ lambs, the report said.
Another common complaint is the prices received by packers for meat didn’t fall as rapidly as the price of lambs.
The USDA’s report discounted the notion that this dynamic led to higher packer profits while prices declined.
“When prices were decreasing, the value of packers’ inventories decreased, too,” the report said. “The price spread overstated packers’ profits when prices were decreasing, because packers sold less valuable meat produced from lambs procured at earlier higher prices.”
A livestock group that’s critical of packer market power said the USDA report “misses the mark.”
The Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America said the investigation overlooks disturbing changes in the lamb market.
The cash market for lambs is shrinking while packers shift “more lambs into their non-competitive formula arrangements and by increasing their inventories of packer-owned lambs,” the group said in a response to the report.
The smaller cash market is worrisome because it’s the only mechanism for competitive price discovery in the industry, R-CALF said.