New rules aim to dismantle market power in the U.S. cattle industry

in August 2nd, 2021

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Whole beef prices for American consumers are up 40%, but the profits from this surge are not being fairly distributed across the global supply chain. Four meatpacking companies (who have dominated the industry for roughly 25 years) are now making up to $1,000 in profit per head of cattle they slaughter and package, which is 20 times their norm of $50. Meanwhile the farmers raising and selling the cattle to these four meatpackers are struggling to break even.

In fact, while meatpacker revenues increased by up to 66% between 2010 and 2020, farmer shares decreased by 9%. Most farmers only make 14 cents per dollar spent on food (down from 35 cents in 1970). Now, the Biden administration has issued an executive order aimed at ending this abuse of market power. A number of steps have already been taken as a result, such as:

  • Diversifying the market.. The United States Department of Agriculture (USDA) will spend $500M to build more meatpacking plants closer to farmers, providing them an option outside the big four meatpackers to either keep processing local or negotiate better cattle prices.
  • Opening up capacity. This investment in more packing capacity also helps avoid unplanned disruptions that limit supply and surge prices for consumers. For example, supplies were greatly reduced when a fire shut down a Tyson plant that processed more than 6,000 cattle per day for several months in 2019.
  • Limiting long-term contracts. Meatpackers often make contracts months in advance, which secures their supply but leaves the sale price unknown to farmers. One bill introduced in the Senate would require meatpackers to instead negotiate prices every week to increase competitive bidding.
  • Making it easier for farmers to sue contracted meatpackers over unfair, discriminatory, or deceptive practices. That said, R-CALF USA, a nonprofit dedicated to ensuring profitability for the U.S. cattle industry, worries this is inadequate, given their ongoing 2019 lawsuits against the big four meatpackers.

Until these changes return results, beef prices remain high. Grocery stores have increased beef prices by 5% and steaks 9%. Some restaurants have taken red meat off the menu altogether. In the meantime, consider purchasing your meat directly from farmers in your area. This local food directory from the USDA helps you find farms selling meat near you.

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