C. Docket No. Iowa Beef Processers, inc. The standard method for purchasing cattle is for packers to inspect pens of cattle at the feedyards and to bid on the cattle for sale. Under a forward contract, the packer and the producer agree on the price to be paid for the cattle weeks or months before the animals are ready for slaughter. Forward contracts offer producers the advantage of locked-in prices and protect them against market fluctuations.
Marketing agreements are a more extended version of forward contracts.
Under such agreements, a producer promises to sell most of its cattle to a packer at prices determined by a negotiated formula, which can be adjusted after slaughter according to the quality of the beef. Plaintiffs allege that engaging in forward contracts and marketing agreements in order to establish a captive supply enables IBP to depress the market at strategic times in order to force producers to accept artificially low prices for their fattened cattle. Plaintiffs contend that, because IBP controls a large quantity of cattle through these means, it can slaughter the cattle it controls, or threaten to do so, in order to force producers to choose between selling their cattle at an unacceptably low price or being left without a buyer for their cattle. Plaintiffs argue that forward contracts and marketing agreements are preferential to the producers who sell under such agreements and thus are unjustly discriminatory because they can be used to coerce producers who choose to sell on the spot market into accepting lower prices for their cattle. The district court declined to certify such a class.