Court Overturns Captive Supply Ruling

U.S. 11th Circuit Court of Appeals upheld livestock producers' rights to enter into marketing arrangements with packers. Compiled by staff

Published on: Aug 17, 2005
The 11th Circuit Court of Appeals, in a decision issued late Tuesday, has upheld livestock producers' rights to enter into marketing arrangements with packers. In the ruling, the court said IBP inc. did not violate the Packers & Stockyards Act (PSA) by forward contracting for cattle in the 1990s. IBP is now Tyson Fresh Meats, a division of Tyson Foods Inc.

IBP had been sued by six cattle producers who maintained that the packer's practice to forward contract cattle -- referred to as "captive supplies" -- decreased demand and, therefore, prices for cattle on the cash markets and was a violation of PSA. The case is known as Pickett vs. IBP.

The jury found, in February 2004, Tyson liable for $1.28 billion in damages for eight years of cattle price manipulation. The trial judge threw out the jury's verdict, saying the producer-plaintiffs presented insufficient evidence, after which they appealed to the 11th circuit.

According to Farm Progress sister publication Feedstuffs, the circuit, in its ruling, stated that the plaintiffs' talk about independence "has emotional appeal," but PSA wasn't enacted "to protect the independence of producers from market forces." The circuit said producers "are not entitled to force their (marketing) preferences on other producers and on packers."

The Organization for Competitive Markets expressed its disappointment in the ruling saying that judges did not sit on the jury, but overturned the jury's decision.

OCM president Keith Mudd says, "The Appellate Judges did not hear the testimony of the witnesses or sit through several weeks of trial. Instead, they listened to one hour of argument and decided the jury was wrong."

A statement from OCM says the Packers & Stockyards Act prohibits price manipulation by its language. "The Pickett case was brought under this Act. No language in the statute says packers can justify price manipulation, or other unfair practices, if they have a business justification," the statement says.

"The Court is writing words into the Packers & Stockyards Act that Congress did not choose to include when passing the Act in 1921," says Mudd. "If this decision stands, the Act is virtually dead."