In the last two decades, hundreds of thousands of US beef producers have gone out of business, and we are now losing 40 operations per day by some estimates. In just the last two years, around 1,700 small feedlots run by independent family farmers have gone out of business due to corporate consolidation.
This leads 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, major meatpackers controlled 36% of the beef supply. Beginning in that decade, we saw deregulation and the elimination of antitrust enforcement designed to stop 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 is the result? In 1980, beef producers made 62 cents of every dollar consumers spent on beef. Compare with today, where only 37 cents of the cow dollar goes to the producer. The price of beef in the last decade has risen from $4.67 a pound to $7.36 a pound – a 60% increase for consumers. But the profit of cattle producers dropped from $518 per calf in 2014 to last year’s $125 per calf.
Profits for producers in 2014 were helped by mandatory COOL – state-of-origin labeling, which was required by the 2008 farm bill. However, corporate agriculture groups such as the North American Meat Institute and the National Cattlemen’s Beef Association successfully lobbied Congress to repeal COOL in 2015, which led to lower prices. one of the biggest year 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 in 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 the meatpackers manipulate the cash market through their control of the beef supply to lower the price of beef, the result is less for farmers and more profit for corporate meatpackers. The result is that the consumer is gouged when the producer is deprived.
The use of AMA increased from about 40% in 2005 to 80% in 2019. According to research conducted by Georgetown and Ohio State University, for every 1% increase in AMA, there is a 5% decrease in cash market prices. This kind of pricing scheme has doubled the profits of butchers, while farmers and small independent feedlots suffer from higher input costs and lack of access to markets.
There are efforts to fix the corporate-controlled system by increasing competition for beef by supporting the construction of packing plants that are not affiliated with the Big Four. However, to ensure independent processing plants succeed, we need to strengthen and enforce antitrust laws and fix the market so that these new plants can compete on a better playing field.
For example, Congress should pass the American Beef Labeling Act to restore mandatory country-of-origin labeling for beef, and the U.S. Department of Agriculture should close loopholes in voluntary labeling rules so that only beef born, raised and harvested in the United States can use the label “Product of the USA.”
Another bipartisan bill, proposed by Sens. Chuck Grassley and Jon Tester, is Bill 50/14, which would require that meatpackers buy 50% of their supply in the cash market and cannot own cattle more than 14 days before harvest.
Bill 50/14 is a threat to the profits of the meatpackers so they immediately started lobbying Congress, and convinced the parliamentarians to introduce a weaker compromise bill, the Beef Price Discovery and Transparency Act, which would leave the meatpackers in charge for many 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 repeal COOL when 90% of Americans want truth in labeling? Why does Congress bow to the World Trade Organization and the big butchers?
We must call our representatives and senators to demand they support and pass the American Beef Labeling Act and Bill 50/14. Then, they should break up the huge meatpackers for the betterment of both consumers and producers.
The column first appeared in the Missouri Independent. Like the Idaho Capital Sun, The Missouri Independent is part of the State Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. The Missouri Independent maintains editorial independence. Contact Editor Jason Hancock with questions: [email protected]. Follow Missouri free on Facebook and Twitter.