For Immediate Release: April 24, 2026
Contact: R-CALF USA CEO Bill Bullard
Phone: 406-252-2516; r-calfusa@r-calfusa.com
Please find below R-CALF USA’s weekly opinion/commentary that explains how our cattle and sheep industries have fared while operating under a free market theory without guardrails for the past several decades. It is in three formats: written, audio and video. Anyone is welcome to use it for broadcasting or reporting.
How Packers Weaponized Cattle Purchasing
April 24, 2026
Local livestock auction yards have been around since about the time cattle were first introduced as a commercialized American food source and they are the epitome of a robustly competitive market. Cattle sellers watch as their cattle enter the ring while several cattle buyers bid to the call of the auctioneer, and the highest bidder takes the cattle home. The sales transactions are transparent.
The robustly competitive and transparent livestock auction yards typically sell lighter-weight or feeder cattle, which will go back to grass or to a grow yard or a finishing feedlot, depending on their weight. Cows and bulls are likewise typically sold under such competitive and transparent conditions.
The benchmark price for feeder cattle is based on their expected future value when they are fed to their optimal slaughter weight and sold to a beef packer for slaughter. This means that the market between the feedlot and the packer is critically important to every cattle producer who sells cattle, regardless of the cattle’s age or weight.
Put another way, lower fed cattle prices translate to lower feeder cattle prices, and vice versa, even when feeder cattle are sold under the livestock auction yards’ competitive conditions.
That livestock auction yards have persisted throughout history is a testament to the cattle industry’s deep-rooted preference for competitive and transparent markets.
Unfortunately, though, the cattle industry’s vigilance in preserving competitive and transparent markets for their feeder cattle was not carried forward to what is arguably the most important market for the entire cattle industry – the fed cattle cash market. That market has changed radically over the past century, and even more so during the past two decades.
A century ago, fed cattle were sold at stockyards, but over time, stockyards became irrelevant as beef packers began purchasing fed cattle directly from feedlots. When there were many feedlots and many packers, this new system was still considered competitive.
But beginning a bit over a generation ago, the many packers soon became only a few, which increased their market power and their ability to create a new marketing system that circumvented competition.
The handful of packers soon became market gatekeepers, deciding who did and who did not have timely access to the market. This created a new risk for fed cattle sellers, known as market access risk. The packers who subjected cattle sellers to this new market access risk then leveraged that risk to entice more and more cattle sellers to enter agreements to market their cattle without establishing a competition-based price in return for guaranteed, timely access to the market when their fed cattle were ready to sell.
2005 was the last year that over half of all fed cattle were sold in the competitive cash market. Ten years later, in 2015, when the cattle market inexplicably collapsed, the competitive cash market had shrunk to a historical low – fewer than 23% of fed cattle were sold in the competitive cash market. Most of the cattle were sold under commitment agreements that did not contain a negotiated price. These agreements are known as formula pricing arrangements.
And here’s the anticompetitive part. Using their leverage to entice cattle sellers to forego the competitive cash market in return for timely market access, the packers shifted large volumes of cattle out of the competitive cash market and into formula pricing arrangements. But under those arrangements, the packers pegged the base price of cattle to the average cash market price determined within a particular marketing region.
This shrank the cash market to an ultra-thin level, too thin to establish a competitive price for the cattle that remained. Yet, it is the average price discovered in the ultra-thin cash market that becomes the base price for the majority of cattle committed under the formula pricing scheme.
This means the packer-contrived formula pricing scheme incentives the packers to lower the average price of cattle sold in the cash market, because doing so lowers the price of all the cattle they purchase.
This unambiguous incentive to lower the cash market price makes formula pricing arrangements inherently anticompetitive. And, clearly, packers can lower whatever average cash market price is built into their formula-priced cattle. They can simply avoid the cash market for a week or more to reduce competition, which would lower the average cash market price; they can purchase only the lowest quality cash cattle, which would lower the average cash price; or they can purchase cattle in a different marketing region to avoid running up prices in the cash market to which their formula cattle are tied.
And now you know how the packers have weaponized cattle purchasing.
###
R-CALF USA’s weekly opinion/commentary educates and informs both consumers and producers about timely issues important to the U.S. cattle and sheep industries and rural America.
Ranchers Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF USA) is the largest producer-only trade association in the United States. It is a national, nonprofit organization dedicated to ensuring the continued profitability and viability of the U.S. cattle and sheep industries. For more information, visit www.r-calfusa.com or call 406-252-2516.