Holcomb (KS) Fire Triggers USDA Investigation Into Market Manipulation

On the evening of August 9th, the first 911 calls came in regarding a fire at the Holcomb (KS) meatpacking plant owned and operated by Tyson Foods. It took firefighters 12 hours to get the fire under control. Around 1,200 employees were on duty at the time of the fire, all of whom were evacuated. The plant closed indefinitely until the company could assess the damage; however, Tyson paid employees a weekly guarantee until production resumes.

Subsequently, volatility in cattle markets led to fears of market manipulation, prompting an investigation. From Robby Simpson, President of the Missouri Cattlemen’s Association:
"We applaud U.S. Department of Agriculture Secretary Sonny Perdue for listening not to conspiracy theories or charts and graphs of economists. He leaned on the expertise of the men and women who have successfully made their living in the cattle business through mercurial markets, regulatory uncertainty, unpredictable weather and much more. These producers - from the cow/calf operator to the backgrounder to the feeder to the livestock market - understand the markets. They are good at what they do and when the overwhelming majority speak, we listen and this administration does as well."

"Cattle producers have sound reason to question market events that transpired after the Holcomb fire. While a sharp decrease in slaughter capacity was anticipated, slaughter actually increased some 9,000 head from the week prior to the fire. Further, most expected this market disruption to cause uncertainty, but few could believe in one week fed cattle prices would drop 5% and Choice boxes would spike 9% while total slaughter increased. All the while, prices for feeder calves plummeted. The financial woes do not reside within one segment of the industry. It impacts the entire chain and causes lending institutions a high level of uncertainty as equity dwindles across the board."

"We back Secretary Perdue's investigation into the market reaction in live cattle markets and boxed beef subsequent to the Holcomb fire. There is no harm in conducting an investigation to ensure integrity of the markets and to respond to the justified concerns of thousands of U.S. cattle producers. In fact, it's simply the right thing to do. No matter the result of the investigation, good can come from better understanding what took place and how to best mitigate future disruptions."

The market volatility following the Holcomb Fire got attention at the national level, prompting USDA Secretary Sonny Perdue to announce an investigation into market manipulation:

U.S. Secretary of Agriculture Sonny Perdue issued the following statement regarding the beef processing facility in Holcomb, Kan.:

“As part of our continued efforts to monitor the impact of the fire at the beef processing facility in Holcomb, Kan., I have directed USDA’s Packers and Stockyards Division to launch an investigation into recent beef pricing margins to determine if there is any evidence of price manipulation, collusion, restrictions of competition or other unfair practices. If any unfair practices are detected, we will take quick enforcement action. USDA remains in close communication with plant management and other stakeholders to understand the fire’s impact to industry. 

I have spent this summer visiting with cattle ranchers across the country, and I know this is a difficult time for the industry as a whole. USDA is committed to ensuring support is available to ranchers who work hard to the feed the United States and the world.”