Nelson: American Cattle producers are offered hollow victory; needing solid solution

“Dominant regional market shares should be permitted no more than dominant shares in national markets.” Wisconsin Senator Herb Kohl

The Senate Judiciary Committee held a hearing October 30 focusing on monopsony power affecting American agriculture. Participants were a who’s who, Iowa Senator Grassley, Iowa Senator Harkin, Wisconsin Senator Kohl, noted Iowa State University Economist Neil Harl, Mississippi attorney & cattle producer J. Dudley Butler, Organization for Competitive Markets CEO Michael Stumo, University of Wisconsin law Professor Peter Carstensen, Hewitt Pate, Assistant U.S. Attorney General and others. All testified of concern for American farmers & ranchers livelihoods, and the consequent loss of population throughout rural America if the monopsony power held by a hand full of large corporate meat packers isn’t brought under control. Maybe you missed this hearing, after all it was held on October 30, 2003, nearly 20 years ago. As if the wisdom from many brilliant minds on the topic of meat packing concentration wasn’t enough then, the quest for answers continues today. But the answer to the question “Is there a concentration problem in the beef packing sector” was definitively answered a generation ago: yes! Today the same harangue of meat packers and their paid lobbyists, and apologists continue to openly question if there’s a meat packing concentration problem. But this is nothing but a stall tactic.

Even the proposed triggers put forward by NCBA play into the packer’s stall tactic. NCBA recently released 2022 policy priorities. These include better risk management, access to data, tax policy, labor and transportation issues that continue to plague the industry. Packers and their supporters continue to push for status quo, based on the claim that it provides cheaper food for consumers. But their “cheap food” model met the Holcombe fire in August of 2019, highlighting the fact that consumers aren’t benefitting from packing industry “efficiency.” Packers benefit from reducing prices for slaughter cattle while extracting record prices for beef. Stagnant prices for slaughter cattle (during a time of rapidly raising feed & non-feed costs) has sent a strong message to ranchers to liquidate cows while at the same time beef demand remains strong. To make up for this shortfall of domestic production, imported beef has filled the void with 1 pound in 5 of beef supplied to U.S. consumers being imported. To add insult to injury much of this imported beef is even easily eligible for a “Product of USA” label.

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Can History Repeat Itself?

The beef packing concentration situation is a difficult one to deal with. Thirty years ago economist Neil Harl revealed that the time to deal with consolidation was at around 40% concentration, otherwise the participants become too powerful to control. The 4 firms that today control 85% of the U.S. beef packing industry are 4 of the largest corporations in the world, highly profitable and integrated into other meat proteins and agricultural commodities. Over 100 years ago competition & concentration in the meat packing industry was also a serious problem, one that was dealt with for years before a solution was reached. The Consent Decree of 1920 provided that solution, coming about through extreme pressure brought to bear on the meat packers of that time. Pressure from the Federal Trade Commission, the U.S. Attorney General, USDA along with Congress (which was in the process of passing the Packers & Stockyards Act). Many “guns were drawn” in the fight to reign in the meat packers back in 1920 (even though their concentration level then was only 50% versus 85% today). Also, today there are several court cases currently being judicated that have successfully brought pressure on the packers, several in the last year. Members of Congress recently commented that settlements from one of these suits against meat packing giant JBS was not nearly enough. Perhaps Congress itself should regroup and put more of its skin in the game and take a much stronger tact in dealing with the meat packing consortium, seeing that many private individuals have taken to the courts to try to do what Congress has only flirted with for years: reign in the meat packers.

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A consent decree revisited will in deed require heavy lifting from the Federal Trade Commission, the U.S. Attorney General and USDA. With the Biden Administration already on board as it openly talks of meatpacking concentration and how it needs to be remedied, the opportunity appears ripe. But it was Congress’ threat (and the threat they delivered with the Packers & Stockyards Act) that pushed the agreement forward until rescinded in 1981 by the Reagan Administration. (FYI, packing concentration level of the Big 4 in 1980 was 35%, and was 81% by the year 2000). While there’s been a general call for unity within the cattle industry to do something, the packers and their supporters still deny the severity of the concentration issue, making unity difficult. It was strength & unity in Congress in 1920 that delivered for cattle producers and is what’s needed today. The current compromise bill (S.3229) offered up by Senator Fischer (herself a large recipient of meat packing lobbing contributions) and Senator Grassley uses market data from the last 18 months as new cash negotiated minimums, when the last 18 months have been historically a very poor time for cash negotiation. Also, the compromise bill would riskily create a regional governance of our economy based on the relative lobbying strength of one geography over another.

Wisconsin’s Senator Kohl said it best in that 2003 hearing: “Dominant regional market shares should be permitted no more than dominant shares in national markets.” The Fischer/Grassley compromise bill would in fact allow dominant regional market shares, pitting one region against another while not dealing with the overreaching lack of competition nationally within the extremely consolidated beef packing industry. Congress must resist the opportunity to deliver a hollow victory. What is needed is a solid solution, like what was needed in 1920.

Eric Nelson

Farmer/feeder, rancher

Moville, Iowa

R-CALF USA Vice-President and Region VII Director (Iowa, Wisconsin, & Minnesota)