After several months of complaints and calls to action from stakeholders across the beef industry, the Department of Justice has launched a probe examining whether the four main packers who control 80% of the meat supply are engaging in unfair collusion and price-fixing.

After several months of complaints and calls to action from stakeholders across the beef industry, the Department of Justice has launched a probe examining whether the four main packers who control 80% of the meat supply are engaging in unfair collusion and price-fixing. To start, the DOJ has requested information from the so-called big four through formal subpoenas.

The subpoenas follow the announcement of criminal charges against four current and former executives of chicken processing companies alleging that the companies conspired to fix prices of chicken sold to grocery stores and fast-food chains.

Consolidation has been hurting beef producers and consumers for many years

The pressure against Tyson, Cargill, National, and JBS has been mounting for some time. In October 2019, Pacific-Agri Products, a beef distributor, filed a lawsuit against the big four accusing them of collusion and violations of antitrust laws. Among other things, it alleges that between 2015 and 2018 the big four worked together to reduce the number of cattle slaughtered with the intent to create artificial beef supply restraints. 

The lawsuit points to several instances between 2013 and 2015 when the big four reduced processing capacity or closed plants. In 2013, Cargill temporarily closed a Texas-based beef processing plant with the capacity to process 5,000 head per day. The following year, National closed a California plant capable of processing 1,000.

Suppressing the number of cattle slaughtered creates a double win for the packers. It gives them leverage over beef producers, typically consisting of independent farmers and ranchers, because the high number of live cattle ready for butcher means they can offer farmers lower prices. When there is an oversupply of cattle, farmers and ranchers are forced to take whatever price they can get from the packer. If they don’t accept the price, they’re stuck continuing to feed and care for live cattle that have already reached butcher weight.

On the other end, suppressing the number of cattle slaughtered allows the packers to stick high prices on the processed meat that they sell to wholesalers and distributors like Pacific-Agri Products. These downstream entities are undersupplied as a result of the suppression on slaughter and are forced to pay inflated prices for any beef they can get. In many cases, the inflated price gets passed on to the consumer at the supermarket.

The lawsuit also notes that the spread -- the difference between the price paid to ranchers for their animals and the wholesale cost of beef -- has increased 60% based on USDA data. To add insult to injury, JBS reported record profits in 2018 while Tyson’s operating margin reached 7%, roughly twice as high as its 2014 operating margin.

Pacific-Agri Products’ lawsuit was just one of many filed in recent years alleging similar price-fixing scenarios among the big four.

The pandemic will only exacerbate the poor prices that farmers and ranchers receive

The pandemic has only exacerbated the already historically low prices that beef producers were receiving. Prices for cattle and hogs fell 20% to 40% during April in response to restaurant closures and challenges in the supply chain due to Covid-19, according to the K-State Extension Service. The cattle industry will lose an estimated $13.6 billion as a result of the pandemic, according to research commissioned by the National Cattlemen’s Beef Association. Roughly $3.7 billion of that figure will affect cow-calf producers. These are typically independently owned farms that raise calves to be sold to a variety of buyers including feedlots

Meanwhile, retail prices for beef have reached a new milestone in 2020 with the USDA listing the average price for all fresh beef at $6 per pound in January, up 95 cents or 19% from January 2014.

Regenerative agriculture is about paying farmers and ranchers for the true cost of their labor

The effort to build a better meat supply chain in the US is about more than encouraging the adoption of management intensive grazing or addressing the major bottleneck that a lack of access to processing facilities causes. It’s about creating a system where the men and women who dedicated their lives to taking care of the 94.4 million beef cattle in the US are paid fairly for their labor. 

Shifts in consumer demand are also suggesting that a new system for getting beef from pasture to plate is needed. Even before the pandemic, many consumers expressed distrust over purchasing meat from the supermarket due to a lack of transparency about where the meat comes from. Without country of origin labeling, which is a hot topic these days, imported meat products can be labeled Product of USA as long as some further processing of the meat happens on American soil. Origin aside, 68% of shoppers feel it is important for a grocery store to provide transparent information about how and where livestock was raised, according to the Food Marketing Institute’s The Power of Meat 2020 report.

By opening up new channels like selling direct-to-consumer and cutting out the middlemen, farmers and ranchers can set their own prices and receive better margins. In many cases, those margins will be reinvested into the farming operation to pay for new infrastructure, more livestock, or marketing and sales support.

The upcoming book and documentary project Sacred Cow makes the nutrition, environmental, and ethical case for better meat. The book comes out July 14th and is available now for pre-order through most major booksellers. And don’t forget, when you send us your receipt by July 14th, you’ll get over $200 in gifts plus a sneak peek preview link to the film before the general public gets to see it! Check it out here.

Lauren Manning, Esq., LL.M., is a cattle farmer, an agricultural law professor at the University of Arkansas School of Law, food journalist, and contributor to the forthcoming documentary and book project Sacred Cow: The environmental, nutritional, and ethical case for better meat.