Appellate Court Overturns Packer Verdict

The 8th U.S. Circuit Court of Appeals this week threw out a lower court verdict that found the nation's largest meat packers manipulated prices as a result of a USDA computer error.

The 8th U.S. Circuit Court of Appeals this week threw out a lower court verdict that found the nation's largest meat packers manipulated prices as a result of a USDA computer error.

From April 2, 2001 to May 11, 2001, USDA under-reported boxed beef cutout prices for Choice and Select beef. A class-action suit filed by Herman Schumacher of South Dakota, Mike Callicrate of Kansas and Roger Koch of Nebraska, claimed packers knew or should have known of the USDA error and used the info to pay less for cattle. A 2006 trial in a South Dakota federal court found the packers guilty and assessed $9.3 million in fines.

However, the appeals court found the District Judge erred when he instructed the jury that a showing of intent was not required, according to the 8th Circuit Court's written opinion. "We conclude that to prove a violation, a plaintiff must show that a packer intentionally committed unlawful conduct. Here, the plaintiffs produced no evidence that the Packers intentionally violated the PSA (Packers and Stockyards Act) by manipulating or controlling (or attempting to manipulate or control) cattle prices," the court wrote. To read the appeals court's opinion, go to

The issue is not that the original ruling was dismissed -- that was anticipated by nearly everyone. The real issue is that the industry continues to waste precious efforts on these types of frivolous lawsuits when the industry has substantive and significant issues facing it.

The reality is that any sincere effort to appraise profitability in our industry shows that there is a serious problem. That problem extends through every major segment of our business including seedstock, cow/calf, feeding and packing.

While we must always be vigilant in making sure that the playing field is level and competitive, our fundamental problem is that we continue to largely be a commodity business with low margins and large capital requirements. And while we have made great strides in building demand, creating brands and moving toward various forms of value-based marketing initiatives, overall we would most accurately be described as a mature industry that has seen declining demand over time.

Population growth, export demand, and value creation have been the fuel of recent demand growth; not consumption increases from our core customers. It is these facts that make the packer conspiracy theories inherently dangerous for our industry, because they distract us from dealing with the real challenges and opportunities that exist.

In the past, when I have written something that could be construed to be in favor of the packing industry, it has generated a flood of emails (many not sent directly to me), accusing me of being bought and paid for by the packing industry. I, like most cattlemen (and yes, I make my living from cows), have a natural tendency to dislike or distrust packers. We are in a competitive, segmented business where profits in one segment tend to come out of the wallet of another. But I also truly believe that it benefits us as cow/calf producers to have healthy, vibrant and profitable segments above us including feeders, packers, wholesalers and even retailers.

I unabashedly admit that I want an industry where all of us are not only sustainable, but profitable. And while I could use a cash infusion as much as anybody, I have never directly received any income from the packing industry. As hard as it may be to believe among the conspiracy theorists, it has never been offered.

As objectionable as they may be to some, my opinions are just that -- my honestly-held opinions. I arrive at my opinions with one major underlying presupposition; I want my kids to have a chance to participate in this industry if they so choose, and I hope it is a stronger, more vibrant industry because of the vision and actions we are taking now.

There are challenges, but I believe that this industry's future can be exceedingly bright. Smart people will continue to disagree on the path this industry should take, and that is a good thing. I am looking forward to the industry gathering and debating these topics in a vigorous manner these next few weeks.

Please do not hesitate to question my opinions. However, one thing we can say from watching the presidential primary elections is that the experts still attack the messenger when they don't like the message. I would like to save everyone some time by stating those who wish to impugn my motives are unequivocally wrong. Yet, they are certainly right in their belief that this is an industry worth fighting for.