The Cartel That Controls the US Meat Industry
And How We Build a Better Food System
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This is our first entry in the new Antitrust Series, in which we study concentrated corporate power, industry calcification, political influence, and - of course - policy solutions. We’ll revisit this series from time-to-time.
Since 2020, Americans have experienced rising food prices while farm closures have ticked steadily upward. Inflation and supply chain issues stemming from the pandemic have been explicitly or implicitly blamed in the news. However, the inflation narrative overlooks a more endemic, structural problem with the industry at large.
Through a string of unchecked acquisitions over 30 years, Tyson Foods, Cargill, JBS USA Holdings, and National Beef have gained control of roughly 85% of the total hog, cattle, and poultry processing market. For brevity, we’ll call these four meat processing corporations “BigAg” (or “the cartel”).
As we conducted our research, we found example after example of clearly negative economic outcomes for consumers, workers, and farmers tied directly to BigAg’s dominance. The upshot? There are policy solutions and hope for a better food system as a whole…if our elected officials would kindly act on them. We’ll go over 3 effected groups and discuss policy solutions at the end of each section.
Let’s start at the checkout aisle. There have been high inflationary periods throughout history, but none have been driven as much by corporate profits as the inflation spike of 2021-2022. In theory, if everything including raw materials and labor get more expensive, prices will increase but profit margins should not. But when we overlay BigAg’s input costs and prices consumers pay, we see the following:
In this chart, price changes (“store price change”) may seem consistent with various inflation-related price increases. But importantly, the producers’ input costs - a leading indicator of what consumers will pay - diverges from the the price consumers end up paying in grocery stores. Looking forward, more consolidation in the market also opens the door to further price increases as meat products are sourced from BigAg as opposed to in-state, regional, or local sources (higher transportation costs).
The chart is an example of profiteering/price gouging at a time when Americans are finding it harder to get by financially. But taxpayers are actually paying BigAg twice: once at the checkout aisle and again via taxes. Namely, through the Farm Bill.
The Farm Bill sets the food policy for the country. Most of the provisions in it - 81% - go to SNAP programs (colloquially called “Food Stamps”). Meanwhile, the other 19% increasingly benefits BigAg. Congress renews the bill every 5 years; it will be renewed again this year. The non-SNAP provisions cost taxpayers $165 billion in 2018 and are slated to cost $287 billion in 2023 with the passage of a $1.51 trillion dollar renewal (the largest in US history).
Tyson’s operation covers roughly twice the land area of New Jersey at about 10 million acres or 22,500 times the size of an average farm. That’s a lot of insurance for taxpayers to cover.
Proposed Policy Solutions: Break up the 4 meat processors to promote competition and honest price discovery. Expand the Packers & Stockyards Act to monitor margins on meat products, prevent opportunistic price gouging/fixing, and prevent further acquisitions.
🛠 Labor (featuring Regulatory Capture)
We estimate that about 350,000 people work for Tyson, JBS, Cargill, and National Beef in the US. 350,000 employees who are largely powerless against behemoths which abuse three fundamentally broken systems. (1) Labor Laws: that are at best outdated and, at worst, actively anti-labor. (2) The Immigration System: that simultaneously enables BigAg to procure cheap migrant labor and can be weaponized to prevent that same migrant labor from organizing for or demanding humane working conditions. (3) The Criminal Justice System: namely, that involuntary servitude can be used as a punishment for a crime (13th Amendment) and BigAg corporations are active, willing participants in this system.
We really want to emphasize this point: labor’s powerlessness in this industry is enshrined in laws that were crafted by BigAg corporations. Here are just a few examples:
Anti-whistleblower laws (“Ag-Gag Laws”) ostensibly crafted to prevent whistleblowing related to animal abuse, also outlaw free speech any whistleblowing by laborers in states across the country, so public outcry over working conditions
States in which BigAg companies largely operate have started loosening or repealing their child labor laws as in Arkansas - Tyson’s home state (bleakly opening a new pool of cheap, vulnerable labor)
And in 2020, a lobbyist was able to secure an executive order keeping meatpacking facilities open without protections for workers which resulted in COVID spreading rampantly throughout workers’ communities
Proposed Policy Solutions: I mean…there’s modern slavery, free speech suppression, and bribery lobbying here so there’s a lot of systemic change needed. Start with repealing Ag-Gag laws, implement strong national child labor laws, abolish involuntary servitude, strengthen the National Labor Relations Board to crack down on union-busting, and end Fair Labor Standards Act exemptions for farm workers (to start).
Tyson, JBS, Cargill, and National Beef sit at a chokepoint in the market: between grocery stores and the actual farms. While BigAg increases prices for consumers, farmers lose revenue. After a huge overhaul of US farming in the 1960s and ‘70s spearheaded by more non-farm employment opportunities and increased productivity, the number of US farms has decreased approximately 20% over the last 30 years:
BigAg’s consolidated power throttles the price discovery process. In this case, price discovery is a literal auction for livestock and poultry. At auctions, the more buyers there are, the higher the potential sale price as buyers bid against one another. But meat processors are now the primary buyer from feedlots who in turn get their cattle from background ranches (who get their cattle from cow-calf ranches). Cheaper sales from feedlots to meat processors, reduce prices downstream for background ranches and cow-calf ranches.
Over time the share of feedlot-to-meatpacker sales done via contract has increased to 72%, so BigAg sets the price outright with no price discovery process at all. There have been Senate hearings aimed at curtailing BigAg’s power in this vein specifically; namely, to reduce contract purchases to no more than 50% of total feedlot-to-meatpacker sales. Again, this is a good start but it’s ultimately a band-aid for an industry that needs more acute intervention to encourage real competition. Collusion and price fixing would just become a cost of doing business (or at least more so than they seem to already be).
Proposed Policy Solutions: Worth noting again, break up the 4 meat processors. Limit the percentage of contractual sales to 40% for each individual meat processor. Implement a fairer Farm Act that (1) targets subsidies to incentive food production rather than feed production and (2) invests in local and regional food systems.
💭 Closing Thoughts
What gives us hope is the proposed policy solutions are not out of reach and the benefits of implementing the changes help an overwhelming majority of Americans while also promoting food security. The post-pandemic economic shocks co-opted by BigAg as air cover to gouge consumers, squeeze margins out of farmers, and exploit workers, may backfire and spur political will to create real reform.
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I couldn’t fit everything I wanted to talk about in this article, including the fact that there’s a whole climate/environmental dimension to BigAg’s operation and the complex minutia of the actual auctions, so I’ve included articles and videos that I watched to prep this article below:
“Are declining auction prices a result of bidder behavior or auctioneer strategy? Evidence from cattle auctions”. Journal of the Agricultural and Applied Economics Association. Jeffrey H. Dorfman, Wenying Li, Jingfang Zhang.
“Bidding Strategies and Price Discovery”. Community Economics by Forte (Medium)
“How 4 Companies Control the Beef Industry”. Vox (YouTube)
Various food/farm competition policy articles. Farm Action US