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DAVID KRUSE

By Staff | Sep 24, 2010

Pickett versus IBP was an educational lawsuit in terms of my learning how our legal system works.

I was under the impression that juries heard evidence and rendered verdicts, as was the case when a jury awarded $1.2 billion in a class action suit in 2004 against IBP.

The jury believed from the evidence presented that packers used marketing agreements and captive supply to depress the cash market and that this violated the Packers and Stockyards Act.

To my shock, the judge threw out the jury’s verdict and ruled for Tyson on the basis that because Tyson had business justifications for its business practices, what it did, did not violate the Packers and Stockyards Act.

Federal judges have ruled that they interpret a violation of the Packers and Stockyards Act as requiring proof that the packer’s practices harm overall industry competition.

The new rules change the definition for injury so that producers can sue companies if they can show economic loss without having to show competitive injury.

Under the new rule, the Pickett versus IBP jury rather than judge would have prevailed. The revelation that shocked me in Pickett versus IBP was why, if they don’t abide by jury verdict, do they bother to waste everyone’s time serving on juries if the judge makes the ruling anyway.

The jury conclusion was that IBP had injured the cattlemen in the suit, but because the plaintiffs were unable to prove that they had injured all their neighbors, the judge ruled IBP’s actions were permitted under the act.

USDA disagreed with this using this explanation, “Such a requirement would be like having a car stolen, but before the police act, one would need to prove how the theft of the car impacts all of the neighbors. As detailed in the proposed rule, USDA feels this standard thwarts the purposes of the Act.”

A South Dakota State Cattlemen’s Association officer responded, “This rule would make it easier for anyone to sue if they can show economic loss. If packers are tied up in lawsuits, the court fees are more than likely going to be passed back onto producers.”

That’s like saying that it is better to let car thieves go because if the police have to chase them down, our local taxes will go up. It is amazing to me how deep in the sheets that some producers have climbed into bed with packers.

Montana’s attorney general sides with USDA on the new rule, saying, “Using his own consumer-protection laws, a consumer doesn’t have to show harm to all consumers when taking an action against a company, referring to the provision that producers have to show ‘harm to competition’ for a successful Packers and Stockyards case.”

What was always ironic to me is that the late Bob Peterson, when president of IBP, readily admitted that beef packers used captive supply to manipulate the cash cattle market.

Under his management, IBP reluctantly entered into these contracts, claiming to be forced into the practice by the competition, which was aggressively employing them.

He believed IBP could procure its needs from the cash market. The surprise that he expressed was why producers agreed to them. It takes producers willing to partner with packers to give them control of their cattle.

There are a lot of reasons why some producers, looking for preferential treatment, did so and I believe all of them injured their neighbors.

There is no cash market trading for broilers or hogs as contracts dominate production of both industries and cattle producers are being led in the direction of the same trend but have not reached the tipping point for no return yet.

The new USDA rule would at least delay that prospect. That’s why packers and their captive suppliers are fighting back.

The idea of a competitively price-discovered cash market, where packers would have to buy most all their cattle each week, scares them a lot.

They had control of key congressional representatives, USDA officials and judges so the prospect of the rule change occurs outside their current sphere of influence.

Juries are harder for packers to control. The new rules should overrule the judge in Picket versus IBP.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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