Midwest Ranchers Renew Price-Fixing Claims During Coronavirus Shutdowns
Amid the pandemic, shoppers saw beef prices spike, but ranchers weren’t seeing that money. Some critics claim meat processors are fixing the price of beef on both ends of the market.
If you’ve been buying beef this year, you’re paying more for it. Yet, ranchers are getting less. That disconnect has left ranchers and consumer advocates pointing fingers at the meatpacking industry.
The coronavirus pandemic has thrown a harsh light on the structure of the beef industry. It’s like a huge funnel. Thousands of people raise cattle but the funnel narrows until it gets to slaughtering the cattle and cutting up the meat, which is done mostly by four big companies.
Consumer advocates and some produces say those four powerful companies work together to ensure maximum profits. They say the pandemic exposed the fragility and the potential cost of hyper-efficient meat production. Packers say the system functioned admirably through the worst crisis in decades.
When COVID-19 struck, it hit the meatpacking industry especially hard. Red circles on infection maps grew around packing plants marking them as some of the earliest pandemic hotspots. As plants closed down or cut production, farmers like Mike Patterson, who raises hogs in Minnesota faced a desperate situation.
“We're just running out of space and running out of time,” said Patterson on his farm last April. “And at the end, disposing of the animals through a depopulation is the final and only choice we really have.”
Farmer disposed of hundreds of thousands of pigs and chickens, and some carcasses were used only for fertilizer.
Most cattle producers were spared that calamity, but live cattle prices fell off a cliff. At the same time, prices for beef in the supermarket shot up. The difference between the value of meat and the value farm animals mushroomed to levels never seen before. Some customers saw something shocking, something most Americans had never witnessed, empty shelves and meat rationing by some stores.
“What the pandemic has exposed is that the biggest links in our food chain are the weakest,” says Ben Gotschall, a fifth-generation = cattle rancher and dairy farmer in Nebraska. He also runs the Organization for Competitive Markets, a group resisting the corporatization of agriculture.
Gotschall says four big packing companies control 80% of US beef production. When some of their enormous plants shut down, the supply chain buckled.
“Too few players control too much of the market,” says Gotschall. “And so when, when there's problems and disruptions, that's a fragile system.”
It’s a system that has been decades in the making. U.S. beef packing telescoped from hundreds of independent slaughterhouses down to primarily four big corporations by the 1990s. Those four -- JBS, Tyson, National Beef and Cargill -- operate huge plants that concentrate the production.
“We have a lot of eaters at the bottom of the supply chain. We have a lot of producers at the top of the supply chain, but the middle part is bottlenecked because we don't have a lot of competition there,” says Diana Moss, President of the American Antitrust Institute.
Some cattle producers accused the big meatpacking companies of coordinating to keep the price they were paying ranchers low. A grocery store chain sued, claiming the same companies were coordinating to jack up the cost to consumers.
These are not new complaints. They’ve been circulating for decades. But the pandemic and the disparity between what packers were paying farmers and charging customers triggered bipartisan calls for investigations and reform.
While some in the meat industry saw it as price fixing, others see it as the operation of the free market. “It was a very rack wacky time. And, but, but very clearly understandable,” says Bill Haw, a large-scale rancher who has run huge cattle and pork producing operations for more than forty years.
Haw says the laws of supply and demand naturally drove up the cost of beef as the production slowdowns created shortages. He notes that meatpackers also suffered massive losses during the height of the pandemic despite what would have been extremely profitable price differentials in normal times.
The price of beef at the store is back down while price packers pay for cattle has come up. Still, the gap between the two is wider than it was before the pandemic. Producers are still hurting, but Haw notes that the industry has never been easy.
“The cattle business has always been pretty rough. It's a very high-risk business. Uh, we probably have entirely too many people who are in it because of the romantic cowboy ideal of things,” says Haw.
And Haw likes that ideal, loves it in fact, but when it comes to business, he’s all about efficiency -- squeezing out waste, boosting quality, and driving down prices.
Ben Gotschall says the true costs of the meat system aren’t fully reflected in the grocery bill. He says meatpacking workers, farmers and rural communities have paid a steep price for low-cost meat.
“I've seen it in my, in my family and my own community. And in my lifetime, um, we've lost most of our dairy, pork, poultry and beef producers in the country,” says Gotschall. “More efficiency, but that has come at the cost of family businesses, small-town communities and those local economies,” Gotschall says.
The U.S. Justice Department subpoenaed the four big beef packers in an apparent anti-trust investigation, but ranchers like Gotschall aren’t that hopeful anything will come of it this year. It can be difficult to prove companies are working together to fix prices and Gotschall says the Trump Administration, like the Obama Administration before it, has little appetite for taking on big beef.