Our BS beef economy has producers and consumers at the mercy of a bovine meat cartel.
It’s not widely discussed, but market concentration is a devastating double-edged sword, cutting deeply not only into household budgets, but also into the financial heart of small businesses.
The same monopoly pricing power that abuses consumers can simultaneously exert “monopsony” power. While monopoly refers to a market with very few sellers, monopsony is a concentrated, noncompetitive market with only a handful of dominant buyers. Monopsony empowers those few buyers to dictate prices and onerous terms of business to myriad independent sellers of components, ingredients and services.
For a brief tutorial on monopsony, let me call in professor Hamburger. More than any of the other price hikes in 2021, the 21% spurt in the cost of hamburger and other bovine meat products may have jolted Americans the most. Over a few short months, a restaurant burger or a package of ground beef became noticeably pricier, and tight-budget families wondered why cattle ranchers were hitting them with such an increase.
They weren’t. In fact, back at the ranch, the hardy families that raise cattle were being slammed, too — not by price increases, but by disastrous decreases. As professor Hamburger explains, this double whammy is the direct result of our government’s abdication of its antitrust responsibility. Since the 1980s, state and federal politicians and regulators have blithely allowed a handful of ever-bigger meat processors to buy out or force out hundreds of feedlots and packing houses that previously competed to purchase from local cattle raisers.
Consequently, we have a BS beef economy in which producers and consumers alike are now at the tender mercies of a meat cartel: Eighty-five percent of the U.S. beef market is controlled by just four multibillion-dollar goliaths. (JBS and National Beef are Brazilian owned; Tyson Foods and Cargill, Inc. are U.S.-based multinationals.) Despite already wallowing in fabulous profits, this beef cartel has been raising consumer prices during the pandemic, not to stay afloat, mind you, but to profiteer. And it’s working nicely for them. Their profit margin at the end of 2021 was 300% (!) higher than the previous year.
Meanwhile, the same monopoly that’s ripping off customers has been using its monopsony power to bankrupt the beef industry’s last competitive segment: independent cattle raisers. Not only have the Big Four eliminated local and regional cattle-buying competition, but they’ve also divided the national ranching territory, so they don’t have to bid against each other. The result is a corrupted marketing system that traps and strangles ranchers.
The New York Times recently reported that Steve Charter, a third-generation Montana rancher, hoped for a good sale when he saw supermarket beef prices rising, so he took 120 head to an auction that delivers cattle to a JBS plant. He was told he had to commit to selling only to JBS, at a price to be dictated later by the Brazilian behemoth. “I wanted to tell him to go to hell,” Charter says, “But what choice did I have?” There were no other bidders, and cattle are expensive to keep. His break-even price was $1.30 a pound. “Without any consulting or dealing,” he says, “they just decided that they were going to pay me $1 a pound.”
That was Charter’s fifth year in a row without a profitable price. Choking back tears, this lifelong rancher who had hoped his grandchildren would be able to keep the family enterprise going, told the Times: “We’re contemplating getting out… We need a food system that serves everyone, and not just a handful of companies.”
The Food system monopoly is particularly distasteful, squeezing both growers and eaters. The Family Farm Action Alliance inspired President Joe Biden’s billion-dollar plan to expand independent meat processing capacity and re-inject competition into those markets. And the National Farmers Union has launched a “Fairness for Farmers” campaign, “fighting for stronger enforcement of antitrust laws and breaking up?… corporate monopolies.”
Twice elected Texas Agriculture Commissioner, Hightower is a modern-day Johnny Appleseed, spreading the message of progressive populism all across the American grassroots.
He broadcasts daily radio commentaries that are carried in more than 150 commercial and public stations and on the web.
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