Meatpackers Ride Roughshod over North Dakota Ranchers
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Meatpackers Ride Roughshod over North Dakota Ranchers This concentration gives large meatpackers tremendous leverage over independent cattle producers. The beef packing industry has also expanded beyond slaughter and processing and now packers own cattle, operate feedlots and employ contracts with producers to control the cattle supply through all stages of production. These practices enable the meatpackers to drive down cattle prices while keeping consumer beef prices high. Between 1990 and 2007, North Dakota lost 6,500 cattle and calf producers — 38 percent of the state’s cattle operations. 1 The remaining 10,500 cattle and calf operations still represent a third of all North Dakota farms. Packers Versus Cowboys Concentration in the meatpacking industry has been a big problem for cattle producers for more than a century . The industry is even more concentrated today. 2 By 2007, the top three beef packers (Tyson, Cargill and Swift) processed two-thirds of beef cattle. 3 The 2008 JBS-Swift merger is ex- pected to only increase the anti-competitive concentrat ion of beefpackers. 4 Concentration among beef packers lowers the price beef producers receive for their cattle because the cattle buyers don’t really compete with one another to bid up auction cattle prices. USDA-commi ssioned studies of the beef- packing industry found that higher packer concentration tended to drive down the price producers received for live cattle. 5 In many cases, only one or two of the major beef packers will attend cattle auctions and sometimes only one buyer will bid on cattle. 6 Nearly three-fths of feedlots (57 percent) sell auction cattle to a single beef packer, which keeps prices low. 7 A University of Oklahoma study found that when mergers increased meatpacker consolidation and the number of bidding packers fell, the prices cattle opera- tors received fell by as much as $9.39 per hundredweight. 8 Meatpackers Dominate the Whole Supply Chain Meatpackers supply their slaughterhouses with a combina- tion of cattle they buy at auctions, cattle they already own, and cattle secured with contracts with feedlots or producers. 9 Under these arrangements, which are called captive supply arrangements, beef producers or feedlots enter marketing agreements to deliver cattle to meatpackers at some point in the future. Often, the terms allow meatpackers to lower the agreed-upon price when the cattle are delivered. In 2007, the U.S. Department of Agriculture estimated that more than 40 percent of slaughtered cattle were obtained through cap- tive supply arrangements and packer ownership. 10 T he beef-packing industry is more powerful and consolidated than it was a century ago when Congress enacted the Packers & Stockyards Act to break up the monopolies in the meat industry. Meatpackers have merged into a few dominant players and today just four rms slaughter more than four out of ve beef cattle. FOOD
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Transcript of Meatpackers Ride Roughshod over North Dakota Ranchers
8/7/2019 Meatpackers Ride Roughshod over North Dakota Ranchers
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Meatpackers Ride Roughshod
over North Dakota Ranchers
This concentration gives large meatpackers tremendousleverage over independent cattle producers. The beef packing industry has also expanded beyond slaughter andprocessing and now packers own cattle, operate feedlotsand employ contracts with producers to control the cattlesupply through all stages of production. These practicesenable the meatpackers to drive down cattle prices whilekeeping consumer beef prices high. Between 1990 and2007, North Dakota lost 6,500 cattle and calf producers —38 percent of the state’s cattle operations.1 The remaining10,500 cattle and calf operations still represent a third of allNorth Dakota farms.
Packers Versus Cowboys
Concentration in the meatpacking industry has been a bigproblem for cattle producers for more than a century. Theindustry is even more concentrated today.2 By 2007, thetop three beef packers (Tyson, Cargill and Swift) processedtwo-thirds of beef cattle.3 The 2008 JBS-Swift merger is ex-pected to only increase the anti-competitive concentrationof beefpackers.4
Concentration among beef packers lowers the price beef producers receive for their cattle because the cattle buyers
don’t really compete with one another to bid up auctioncattle prices. USDA-commissioned studies of the beef-packing industry found that higher packer concentrationtended to drive down the price producers received for livecattle.5 In many cases, only one or two of the major beef packers will attend cattle auctions and sometimes only onebuyer will bid on cattle.6 Nearly three-fths of feedlots (57percent) sell auction cattle to a single beef packer, whichkeeps prices low.7 A University of Oklahoma study foundthat when mergers increased meatpacker consolidation andthe number of bidding packers fell, the prices cattle opera-tors received fell by as much as $9.39 per hundredweight.8
Meatpackers Dominate the Whole
Supply ChainMeatpackers supply their slaughterhouses with a combina-tion of cattle they buy at auctions, cattle they already own,and cattle secured with contracts with feedlots or producers.Under these arrangements, which are called captive supplyarrangements, beef producers or feedlots enter marketingagreements to deliver cattle to meatpackers at some point inthe future. Often, the terms allow meatpackers to lower theagreed-upon price when the cattle are delivered. In 2007,the U.S. Department of Agriculture estimated that more than40 percent of slaughtered cattle were obtained through cap-tive supply arrangements and packer ownership.10
The beef-packing industry is more powerful and consolidated than it was acentury ago when Congress enacted the Packers & Stockyards Act to break up
the monopolies in the meat industry. Meatpackers have merged into a few dominantplayers and today just four rms slaughter more than four out of ve beef cattle.
FOOD
8/7/2019 Meatpackers Ride Roughshod over North Dakota Ranchers
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Packer ownership allows companies to slaughter theirown cattle when prices are high and buy at auctions whenprices are low.11 Control of live cattle through packer own-ership and condential captive supply arrangements canreduce the prices producers receive for their cattle. Captivesupply arrangements also offer special premium prices andterms to selected feedlots — but other producers receivelower prices and worse terms.12 Moreover, captive supplyagreements are condential, which creates an opaque mar-
ket where one cattle feeder does not know what others arereceiving for their cattle,13 making it difcult or impossibleto make informed decisions about when to sell cattle.
Consumers Pay More, Farmers Get
Less
Consumers haven’t gained from industry consolidationeither. Over the past decade, real consumer prices forground beef have increased by 24 percent, but prices forbeef cattle rose by only 8.5 percent, about a third as fast asretail prices.14
As the gap between what consumers pay for beef and whatproducers earn for cattle continues to grow, very little of thedollars spent by consumers lter back to famers. More com-petitive markets would provide more returns to producers.15
Cattle and calf operations generate more than $850 millionin sales in North Dakota and a third of North Dakota farm-ers raise cattle and calves.16 It’s time for Congress to rein inthe meatpackers so that independent cattle producers canget fair treatment and fair prices.
What You Can Do:
Tell your senators to support the Livestock Marketing Fair-ness Act to make the rules fair for North Dakota ranchers.
For more information, go to www.foodandwaterwatch.org
Endnotes
1 USDA. National Agricultural Statistical Service. North Dakota Cattle Opera-tions Including Calves. Data available at http://quickstats.nass.usda.gov/ downloaded December 2010.
2 Domina, David and C. Robert Taylor. Organization for Competitive Markets.“The Debilitating Effects of Concentration in Markets Affecting Agriculture.”September 2009 at 46.
3 Ellis (2009) at 9.
4 R-CALF USA/Organization of Competitive Markets. Letter to U.S. Departmentof Justice in re. United States of America, et al. v. JBS S.A., et al. December 26,2008.
5 Sexton, Richard J. Department of Agricultural and Resource Economics,University of California Davis. “Industrialization and Consolidation in the U.S.Food Sector: Implications for Competition and Welfare.” Waugh Lecture, Ag-ricultural & Applied Economics Association Annual Meeting, Tampa, Florida.August 2, 2000 at 14.
6 American Antitrust Institute’s Transition Report on Competition Policy: Chapter8 Food. 2008 at 297.
7 Ward, Clement E. Oklahoma State University Department of AgriculturalEconomics. “Feedlot and Packer Pricing Behavior: Implications for Competi-tion Research.” Paper presented at Western Agricultural Economics Associationannual meeting. Portland, Oregon. July 29-August 1, 2007 at 1.
8 Ward (2007) at 11-12.9 MacDonald, James M. and William D. McBride. USDA ERS. “The Transforma-
tion of U.S. Livestock Agriculture: Scale, Efciency, and Risks.” EIB-43. January2009 at 20.
10 USDA Grain Inspection, Packers and Stockyards Administration. “Assessment of
the Livestock and Poultry Industries: Fiscal Year 2007 Report.” May 2008 at 20.
11 Taylor, C. Robert. Auburn University. “The Many Faces of Power in the FoodSystem.” Presentation at the DoJ/FTC Workshop on Merger Enforcement.February 17, 2004 at 3.
12 Carstensen, Peter C. University of Wisconsin Law School. Statement Preparedfor the Workshop on Merger Enforcement. February 17, 2004 at 9.
13 American Antitrust Institute (2008) at 297.14 U.S. Bureau of Labor Statistics; USDA NASS. Agricultural Prices Annual Sum-
mary. 1990-2009.15 Sexton (2000) at 29.16 USDA. 2007 Census of Agriculture. North Dakota State Prole. 2009.
For more information:
web: www.foodandwaterwatch.orgemail: [email protected]: (202) 683-2500 (DC) • (415) 293-9900 (CA)
Copyright © January 2011 Food & Water Watch
Real Farmgate Cattle and Retail Ground Beef Prices
(per pound, in 2009 dollars)
Source: U.S. Department of Agriculture; U.S. Census Bureau
Retail ground beef Farmgate cattle
0
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
1 9 9 9
2 0 0 0
2 0 0 1
2 0 0 2
2 0 0 3
2 0 0 4
2 0 0 5
2 0 0 6
2 0 0 7
2 0 0 8
North Dakota Cattle & Cow-Calf Operations
Source: U.S. Department of Agriculture
0
5,000
10,000
15,000
20,000
1 9 9 0
1 9 9 1
1 9 9 2
1 9 9 3
1 9 9 4
1 9 9 5
1 9 9 6
1 9 9 7
1 9 9 8
1 9 9 9
2 0 0 0
2 0 0 1
2 0 0 2
2 0 0 3
2 0 0 4
2 0 0 5
2 0 0 6
2 0 0 7
