Just four meatpackers control 85% of the market. Cattlemen like me need a voice.
Major players manipulate the cash market through their control of the supply to drive down the price of cattle, resulting in less for the farmer and more profit for corporate meatpackers, writes guest columnist Darvin Bentlage.
An Iowa meatpacking plant had plastic dividers installed separating workers on the production line. (Courtesy of Tyson Fresh Meats)
In the last two decades, hundreds of thousands of U.S. cattle producers have gone out of business, and we are currently losing 40 operations per day by some estimates. Just in the last two years, around 1,700 small feedlots run by independent family farmers were put out of business because of corporate consolidation.
This has led to an even more centralized production system as the dominant meatpackers favor a single-source system — getting cattle from large operations, run by them for their benefit only.
In 1980, the major meatpackers controlled 36% of the beef supply. Starting in that decade, we saw deregulation and a disappearance of antitrust enforcement that were designed to curb consolidation in industries, including meat production.
By the time the ‘80s came to an end, the top four meatpackers controlled 70% of the beef supply, and their power has only grown. Today, the top four meatpackers control around 85% of the beef supply.
What are the results? In 1980, beef producers made 62 cents of every dollar consumers spent on beef. Compare that to today, where only 37 cents of the beef dollar goes to the producer. The price of beef in the last decade has risen from $4.67 a pound to $7.36 per pound — a 60% increase for consumers. But cattle producers’ profit dropped from $518 per calf in 2014 to last year’s $125 per calf.
Profit for producers in 2014 was helped by mandatory COOL — country-of-origin labeling, which was required by the 2008 farm bill. However, corporate agriculture groups such as the North American Meat Institute and National Cattlemen’s Beef Association successfully lobbied Congress to repeal COOL in 2015, which led to the largest one-year price drop in cattle prices. Today, producers receive $300 less per calf than we did in 2014.
Meatpackers have also increased their use of so-called alternative marketing arrangements or AMAs, which are complicated strategies to avoid having to buy cattle on the open market. Meatpackers procure 80% of their supply through AMAs for a price to be named later based on the future cash market. And meatpackers manipulate the cash market through their control of the cattle supplies to drive down the price of cattle, resulting in less for the farmer and more profit for corporate meatpackers. The result is that consumers get gouged while producers are ripped off.
The use of AMAs increased from around 40% in 2005 to 80% in 2019. According to a study done by Georgetown and Ohio State University, for every 1% increase in AMAs, there is a 5% decrease in cash market prices. These kinds of pricing schemes have roughly doubled the meatpackers’ profitability, while cattlemen and small independent feedlots have suffered from higher input cost and lack of access to the marketplace.
There have been attempts to fix this corporate-controlled system by increasing competition for beef by supporting the building of packing plants not associated with the Big Four. However, to ensure independent processing plants succeed, we need to strengthen and enforce antitrust laws and fix the marketplace so these new plants can compete on a more level playing field.
For example, Congress needs to pass the American Beef Labeling Act to restore mandatory country-of-origin labeling for beef, and the U.S. Department of Agriculture needs to close a loophole in voluntary labeling rules so that only beef born, raised and harvested in the United States can bear the label “Product of the USA.”
Another bipartisan bill, proposed by Sens. Chuck Grassley and Jon Tester, is the 50/14 Bill, which would require that meatpackers purchase 50% of their supply on the cash market and cannot own the cattle for more than 14 days before harvest.
The 50/14 Bill is such a threat to the meatpackers’ profits that they went immediately to work lobbying Congress, and convinced legislators to introduce a weaker compromise bill, the Cattle Price Discovery and Transparency Act, which would leave the meatpackers in charge for years while the USDA studies the issue.
That leaves a few questions: First, how many producers and small feedlots are going to go out of business before our elected representatives do something? Second, why did Congress rescind COOL when 90% of Americans want truth in labeling? Why did Congress bow to the World Trade Organization and the big meatpackers?
We should call our representatives and senators to demand they support and pass the American Beef Labeling Act and the 50/14 Bill. Furthermore, they should break up the enormous meatpackers for the betterment of both the consumer and the producer.
The column first appeared in the Missouri Independent. Like the Idaho Capital Sun, The Missouri Independent is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Missouri Independent maintains editorial independence. Contact Editor Jason Hancock for questions: [email protected]. Follow Missouri Independent on Facebook and Twitter.
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