On Second Thought: Where is the beef?

Lately, everybody is mad at the Big Four beef packers. Last December, the Biden administration reported that, since the outset of the pandemic, a period when it could be hard to find a steak, cattle prices fell, and beef processing workers were dropping from COVID, the industry had pulled off a 300 percent increase in profits. When JBS settled its piece of a price-fixing lawsuit from a group of grocers against Tyson Foods, Cargill, National Beef and JBS in February, cattlemen called on the Department of Justice to keep right on investigating the rascals. The neighbors are getting annoyed too. Last month, consumers in Ontario filed a price fixing suit against the Big Four. For once, just about everybody, with the exception of four major beef processing companies, seems to agree it's time for government to do something about it.

The mystery is, what took everybody so long to get upset? It's not as if there is anything new about big players in beef processing (or meat processing generally). Over a century ago, in the years following Theodore Roosevelt's declaration of war on monopolies, it was the Big Five, so now it's the Big Four. One change has been that, over the past 50 years, the market share of those same few players has increased from about 25 percent to almost 85 percent today.

Part of the reason consolidation has proceeded quietly is that bigger, more efficient beef processing operations have been a pretty good deal for a lot of us. A package of hamburger at the grocery hasn't been that expensive for most of the last 50 years. A consolidated processing industry has advantages for grocers too; if a grocer or grocery supplier really only has to shop at four outlets for beef, that's a lot easier than dealing with a host of smaller operations.

Most of us might have been happy enough to go on buying our hamburger and the occasional steak with never a worry about that steer's backstory, but then the pandemic happened. In April 2020, enough processing plants were closed because of COVID outbreaks among workers that slaughter capacity fell 25 percent. Naturally, when all the grocers are competing for the same scarce sirloin, the processor is going to be able to charge a higher price to the grocer, and shoppers get to pay a higher price too.

Naturally, with plants closed and fewer people cutting up beef, the processors are going to pay ranchers less because they really don't have time for all those animals ready to hit the market. At this point, anyone looking at the whole equation, from cow to hamburger, might be troubled. While it may be natural, is it right when the people who want to eat beef are paying more and the people raising cows are making less? Where did all the money in the middle go?

As it turns out, some producers, unlike most shoppers, have been worried about the middle section of that equation — the increasingly consolidated processing industry — for some time. Even absent the kind of price fixing alleged in recent lawsuits, anyone who has played poker can imagine that, when there are only four players in a game that has been going on for years, everybody begins to get an idea of the way the others play a hand. In any case, ranchers have certainly noticed that, during the same years when processing was becoming more consolidated, their both their numbers and their share of the grocery store dollar have been falling.

People working in large beef processing facilities haven't always been blessed by consolidation either. Wages have fallen as non-unionized jobs, mostly taken by immigrants in newer, rural plants on the plains replaced unionized operations in the Midwest. Also, it was high rates of COVID-19 infection among those workers, in part caused by crowded working conditions, that precipitated that first pricing two years ago.

Now that everybody is finally focused on beef processing monopolization, it's good to see some action at the federal level. The Biden administration has authorized $1 billion to support expansion of smaller processing operations to give ranchers more close by options and strengthen competition. Seventeen operations in Montana, including Bear Paw Meats, will receive grants to increase capacity. Both of Montana's senators, as well as other Democratic and Republican senators, are sponsoring legislation that would increase oversight of the major processors, require more competitive price negotiation when cattle are delivered for slaughter, and mandate that only beef animals raised in the United States get the U.S. label.

When I was a kid, the owner of a small local processing facility would show up at dad's hobby farm whenever we had half a dozen steers and heifers ready for market. The visitor would walk around the animals, negotiate a price with my dad, and come back a few days later with a truck to haul the animals. No way was that procedure as efficient as the feedlot to slaughter to packaged beef operation of one of today's Big Four processors. Yet, it's possible to imagine advantages, both economically and in the way people live , especially for rural communities, if more cattle could stay close to where they were born until time for local slaughter and butchering, instead of being shipped as calves to remote feedlots.

Getting to a more distributed and localized beef processing system would mean taking a significant share from the Big Four, maybe reducing their market dominance from today's 85 percent to the 25 percent of 50 years ago. The current administration's small operators initiative is not expected to cut very far into the big players' share. The way to do that would be to emulate Teddy Roosevelt who used his 1901 State of the Union address to loose thunder on "great corporations" that were "hurtful to the general welfare," then followed up by suing to break up Rockefeller's Standard Oil and the other giants of his day.

Since the 1970s, a more permissive view of great corporations than Roosevelt's has become conventional wisdom. The new idea is that bigger is more efficient, and that saves everybody money. By now we have permitted a few giants to dominate many segments of the economy. Not only is beef processing more consolidated than ever, many groceries are chain operations now too, and when it comes to other phases of agriculture, a lot of the producer operations seem more like factories than farms. Of course, we have also tolerated increasing consolidation in pharmaceuticals, military weapons manufacturing, social media, nursing homes. … If we ever do decide to again do something about monopolies, we are going to have a lot to do.

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Will Rawn of Havre is a retired Montana State University-Northern professor.