Over the past two decades, hundreds of thousands of American cattle farmers have gone out of business, and we are currently losing 40 farms a day by some estimates. In the past two years alone, about 1,700 small feedlots run by independent family farmers have closed due to corporate consolidation.
This has led to an even more centralized system of production, as the mainstream meat packers favor a single-source system – obtaining livestock from large farms, run by them for their sole benefit.
In 1980, major meat packers controlled 36% of the beef supply. From that decade on, we saw deregulation and the demise of antitrust measures designed to curb consolidation in industries, including meat production.
By the late 1980s, the four major meat packers controlled 70% of the beef supply, and their power only grew. Today, the four major meatpackers control about 85% of the beef supply.
What are the results ? In 1980, beef producers earned 62 cents on 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 over the past decade has risen from $4.67 per pound to $7.36 per pound, a 60% increase for consumers. But cattle producers’ profit has fallen from $518 per calf in 2014 to $125 per calf last year.
Producer profits in 2014 were helped by mandatory COOL country-of-origin labeling, which was required by the 2008 Farm Bill. However, agricultural business groups such as the North American Meat Institute and the National Cattlemen’s Beef Association successfully lobbied Congress to repeal the COOL in 2015, resulting in the largest decline in cattle prices in a year. Today, producers receive $300 less per calf than in 2014.
Meat packers have also increased their use of so-called alternative marketing agreements or AMAs, which are complicated strategies to avoid having to buy cattle on the open market. Meat packers source 80% through AMAs at a price to be named later depending on the future spot market. And meatpackers manipulate the cash market by controlling the supply of livestock to drive down the price of livestock, which translates to less for the farmer and more profit for the meatpackers. The result is that consumers get ripped off while producers get ripped off.
The use of AMAs has increased from about 40% in 2005 to 80% in 2019. According to a study by Georgetown and Ohio State University, for every 1% increase in AMAs, there is a 5% drop spot market prices. These types of pricing schemes have roughly doubled the profitability of meat packers, while independent ranchers and small feedlots have suffered from higher input costs and lack of market access. .
There have been attempts to fix this corporate-controlled system by increasing competition for beef by supporting the construction of packing plants not associated with the Big Four. However, in order to ensure the success of independent processing plants, we must strengthen and enforce antitrust laws and redress the market so that these new plants can compete on a level playing field.
For example, Congress must pass the U.S. Beef Labeling Act to restore mandatory country-of-origin labeling for beef, and the U.S. Department of Agriculture must close a loophole in voluntary labeling rules. so that only beef born, raised and harvested in the United States can carry the “Product of USA” label.
Another bipartisan bill, proposed by the senses. Chuck Grassley and Jon Tester, is the 50/14 bill, which would require meat packers to buy 50% of their supply from the cash market and cannot possess cattle more than 14 days before harvest.
Bill 50/14 is such a threat to meat packers’ profits that they immediately went to work lobbying Congress and convincing lawmakers to introduce a weaker compromise bill, the Livestock Price Discovery and Transparency Act, which would leave meat packers in charge for years. while the USDA is investigating the matter.
That leaves a few questions: First, how many producers and small feedlots are going to shut down before our elected officials do something about it? Second, why did Congress cancel COOL when 90% of Americans want truth in labeling? Why did Congress bow to the World Trade Organization and big meat packers?
We should call on our Representatives and Senators to demand that they support and pass the American Beef Labeling Act and Bill 50/14. Moreover, they should dismantle the huge meat packers for the good of the consumer and the producer.
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