A lawsuit has been filed by a group of Texas cattlemen who charge that a 1996 Oprah Winfrey show about mad cow disease drove down cattle prices by misleading and frightening consumers. The suit was brought under what are known as Food Disparagement laws or "Veggie-Libel" Laws. The laws state that it is illegal for a person or persons to knowingly spread false information about perishable food items with malicious intent. This lesson will look at the market for cattle and examine the case against Oprah.

KEY CONCEPTS

Commodities Market, Demand, Determinants of Demand, Determinants of Supply, Equilibrium Price, Markets, Supply

STUDENTS WILL

  • Use their understanding of the determinants of supply and demand to aid them in an introduction to the commodities market. 
  • Examine why the changes in prices convey valuable information about the future. 
  • Use the Oprah Winfrey show example to understand the impact the information presented on the show had on the markets. 

INTRODUCTION

A lawsuit has been filed by a group of Texas  cattlemen who charge that a 1996 Oprah Winfrey show  about mad cow disease drove down cattle prices by misleading and frightening consumers. The suit was brought under what are known as Food Disparagement laws or "Veggie-Libel" Laws. The laws state that it is illegal for a person or persons to knowingly spread false information about perishable food items with malicious intent. 

cattleThe Texas Cattlemen who brought the suit were seeking damages of around $10-11 million, claiming that the show caused the price of cattle to drop significantly and thus reducing profits they might have otherwise had. The heart of the plantiffs argument relied on the idea that the information presented on Oprah's show was know to be false by the people involved with the show and guest Howard Lyman. The plantiff's also seeked to prove that the show was the main cause behind a significant decrease in the price of feeder and live cattle. 

The defense argued that their were other factors at play in the market at that time. More importantly the defense argued that the information was accurate and that they were only trying to raise public awareness of a potential threat to the beef supply. The case was heard in court in January and Feburary of 1998 and eventually dismissed by the lower court. The final appeal was ended in 2002, when a federal court dismissed the case with prejudice, meaning that further appeal was not allowed. 

RESOURCES


PROCESS

Read the article excerpts below to learn more about the Oprah Winfrey trial.

Yahoo

Oprah Vilified in Court, Adored Outside

"Witness Bill O'Brien, head of plaintiff Texas Beef Producers, said the Winfrey Show, aired on April 15, 1996, caused prices to fall by 7 cents a pound in one day...O'Brien said meat packers, after hearing about the show, started pulling out of the market in droves."

Dallas News : Shows Caused Prices to Drop, O'Brien Says

"Mr. O'Brien detailed how the West Texas cattle market crashed to 10-year lows in the wake of the show. He cited industry figures showing a drop from 62 cents per pound on April 16 to 55 cents eight days later...The defense blames the beef industry's price drop on drought and other factors."

CNN

O'Brien testified that he heard about an immediate slide in cattle prices after the program aired from contacts in Chicago -- which is home to both Winfrey's show and the mercantile exchange that sets a benchmark for nationwide cattle prices. He responded by notifying his feed yards to start selling off cattle. Within an hour, O'Brien had sold more than 2,000 head. Prices, meanwhile, continued dropping for weeks.

"I didn't try to sell any cattle (later) that week, but from people I talked to, they said the market was dead," said O'Brien, one of several Texas cattle producers suing Winfrey.

Plaintiffs claim that Winfrey's show triggered the market downfall, costing them $10.3 million. They're seeking unspecified punitive damages from Winfrey, her production company Harpo Productions Inc. and show guest Howard Lyman, a food safety activist."

Which determinant of demand led to a demand shift? Did demand increase or decrease after Oprah's television show?

The following information comes from a National Cattlemans' Association report from May 1996.

The amount of beef produced by the beef industry held relatively steady in spite of decreases for several years in the size of the basic cow herd and total cattle herd. That was because of greater output per cow, reflecting heavier average animals, more lean and less waste fat per carcass, and faster turn-over of fed cattle in feedlots. Overall efficiency has improved. Recently the total herd has been expanding again, and beef production is increasing. Production in 1995 was up 3% from a year earlier. With an expanding herd, output will increase further during
the next two years.

Table 2.2

Monthly Commercial Meat Production

 

 

1994

Beef

Pork

Total Red
Meat

Poultry

Total Red Meat
and Poultry

1996

 

 

 

 

 

 

 

Jan

2,220

1,550

3,823

2,753

6,576

 

Feb

2,048

1,417

3,519

2,628

6,147

 

Mar

2,034

1,421

3,513

2,625

6,138

 

Apr

2,153

1,484

3,691

2,702

6,393

Year-To-Date Comparison

 

 

 

 

 

 

 

1995

7,729

5,893

13,828

9,825

23,648

 

1996

8,455

5,872

14,546

10,712

25,258

% of '95

96%

109%

100%

105%

109%

107%


Table 4.1

Average Prices*
Cattle, Wholesale Beef, and Retail Beef
($/cwt.)

Year

Choice Fed Steers

650lb Feeder Steers

450 lb Steer Calves

Beef Cut-Out Value

Choice Retail Beef

All Retail Beef

Featured Retail Beef

 

$/cwt

$/cwt

$/cwt

$/cwt

$/lb.

$/lb.

$/lb.

1980

52.43

73.11

84.62

104.44

2.34

N/A

2.31

1981

68.42

64.40

70.80

99.88

2.35

N/A

N/A

1982

67.97

63.32

67.93

101.31

2.38

N/A

2.25

1983

65.05

62.71

69.30

97.83

2.34

N/A

N/A

1984

65.22

64.11

69.88

100.11

2.35

N/A

2.13

1985

63.66

63.03

71.32

90.76

2.29

N/A

2.05

1986

66.31

60.52

69.01

88.98

2.27

N/A

2.05

1987

60.05

73.82

84.73

97.21

2.38

2.13

2.16

1988

58.93

82.71

96.47

103.28

2.50

2.25

2.26

1989

66.14

84.14

98.76

107.78

2.66

2.46

2.41

1990

70.93

89.02

103.22

116.54

2.81

2.62

2.61

1991

73.94

90.72

105.69

118.31

2.88

2.71

2.62

1992

78.32

83.98

96.77

116.65

2.85

2.66

2.56

1993

76.40

88.96

103.15

119.23

2.93

2.71

2.72

1994

69.28

80.07

93.42

108.57

2.83

2.65

2.59

1995

66.57

68.31

78.22

106.62

2.84

2.59

2.42

1996

65.00

59.22

64.10

101.71

2.80

2.52

2.45

* Cattle-Fax Averages
Sources: USDA and Cattle-Fax

(In the retail category, Choice beef prices are averages for all cuts from Choice grade carcasses. "All" retail beef refers to all types of retail cuts -- including Choice, Select and ungraded beef.)

Fed cattle prices have decreased with increases in supplies of beef and other meats, and feeder cattle and calf prices have decreased sharply with increases in corn prices as well as cattle supply increases.

Based on the information in the interviews, how did some cattle producers respond to the show? If most producers responded in a similar way, which determinant of supply led to a supply shift? Did supply increase or decrease? Do the data above support the notion that the quantity of cattle sold increased over the previous year?

Given the expectations about buyer and seller behavior, what would you hypothesize about the direction of change in the market equilibrium price?

If you were an expert witness testifying on behalf of Oprah Winfrey, how would you describe her role in the decline of cattle prices in April 1996? Use graphs and labels to identify the source of demand and/or supply shifts. Write a description about what you think may have happened. Similarly, if were asked to testify on behalf of the plaintiff, what information could you provide that would help them?

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