Just a Few Companies Control the Meat Industry. Can a New Approach to Monopolies Level the Playing Field? | Civil Eats
The Biden administration is taking steps to give power back to small farmers and processors. Advocates say it’s a ‘monumentous’ step toward upending consolidation in beef, pork, and poultry.
By Lisa Held
July 14, 2021
It may seem like supermarkets sell a variety of chicken, beef, and pork products, but most of those options come from the same tiny handful of companies.
Consolidation within meat and poultry processing has increasingly concentrated power and profits at the top over the past few decades. Four companies now control more than half of the market in chicken processing (Tyson, JBS, Perdue, and Sanderson), close to 70 percent in pork (Smithfield, JBS, Tyson, and Hormel), and nearly three quarters in beef (JBS, Tyson, Cargill, and National Beef), according to one recent analysis.
As advocacy groups see it, this sweeping change has taken place at the expense of farmers, communities, and consumers. And while the federal government has largely taken a hands-off approach—delaying and failing repeatedly to put lasting rules in place to regulate consolidation over the last four decades—industry groups have fought hard against reforms over the years.
Now, real change could be in works. On July 9, President Biden issued an executive order that included 72 actions to tackle corporate consolidation across a range of industries, including agriculture. On the same day, in conjunction with that order, the U.S. Department of Agriculture (USDA) laid out a multipronged plan to increase competition and fairness in the meat and poultry industries. And although the USDA had already signaled some attention to the issue earlier this year, advocates for farmers and ranchers were struck by the historic nature of the actions.
“This is monumental,” National Farmers Union (NFU) President Rob Larew told Civil Eats. “It’s an enormous shift in tone, and we certainly hope that it leads to a restoration of power for farmers in the marketplace.”
Other groups that have struggled for years to get policymakers and administrations to consider the impacts of consolidation on farmers and rural communities put out statements that echoed that sentiment at a rapid clip.
“We’ve urged administration after administration for the past 20 years to begin proper enforcement of both antitrust laws and the 100-year-old Packers and Stockyards Act and this is the first administration to actually take action,” said Bill Bullard, a former Montana rancher and CEO of the ranching trade group R-CALF USA.
Meanwhile, industry groups say new regulations are unnecessary and could interfere with markets in negative ways. The North American Meat Institute (NAMI), which represents the country’s biggest meatpackers, criticized the Biden administration’s announcements, with CEO Julie Anna Potts saying the changes would likely “have unintended consequences for producers and consumers.”
The Biden administration’s actions represent a turning of the tides to some, but they’re also just the first steps in processes that can take years and can shift measurably along the way.
The Consolidation Problem
One sentiment many farmer advocates share is that while consolidation in meat and poultry is not a new problem, things feel different at this moment for several reasons.
While many agricultural groups have long fought any kind of regulation, Larew said that at this point, markets in meat and poultry have become consolidated to a point at which the prices that farmers receive are no longer tied to the “true marketplace.” That reality is increasingly impacting the public. “As bad as it is for farmers and ranchers, it’s also a huge problem for consumers,” he said. “We have a growing disparity between what farmers are receiving and what consumers are having to pay. And in the middle is where the largest packing plants are seeing record profits.”
Disruptions to meat supply chains in 2020 due to COVID-19 put those disparities in the spotlight. As demand for meat skyrocketed, prices went up at grocery stores. But most ranchers did not get more for their beef, and companies that had to temporarily close plants due to outbreaks left pork producers without income or ways to sell their animals. Meanwhile, meat companies’ profits largely increased. Tyson’s revenue went up 2 percent to $43.2 billion in 2020, and Cargill’s revenue increased by 17 percent to $3 billion in 2020.
In the past, attention to unfair practices between companies and farmers has been focused on the poultry industry because of its structure, in which many contract growers compete against one another for income and often sink into debt. Recently, five top poultry processors have also been under investigation for price fixing. In an email to Civil Eats, National Chicken Council president Mike Brown pointed out that the chicken industry is less consolidated than other animal agriculture sectors and said Biden’s order “looks like a solution in search of a problem.”
But Larew said that while chicken growers have historically had the least power in the marketplace, increasingly, pork producers are finding themselves in similar positions “and ranchers are worried that conditions are right for an even more accelerated level of concentration [in beef].”
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A spokesperson for the National Pork Producers Council (NPPC) said the pork industry “has enjoyed healthy levels of competition in recent years” and that they would not take a formal position on the administration’s announcements until specific rules have been proposed.
The beef industry may be the most set up for change. Cattle ranchers have long operated independently but are now selling their animals to fewer buyers, and R-CALF has been calling attention to their declining share of the food dollar in recent years. In May, representatives from R-CALF and NFU joined with groups that have historically disagreed on many issues—including the American Farm Bureau Federation, the National Cattlemen’s Beef Association, and the United States Cattlemen’s Association—to work together on cattle marketplace issues like packer concentration and price transparency. At the end of June, the Senate Committee on Agriculture jumped into the conversation with a hearing “Examining Markets, Transparency, and Prices from Cattle Producer to Consumer.”
Can D.C. Produce Real Solutions?
That Senate hearing focused on topics that Congress has oversight of, such as the Livestock Mandatory Reporting (LMR) program, which is meant to provide price transparency in cattle markets. One of the action items agreed on by the cattle groups in May, for example, was to expedite LMR’s renewal. And senators introduced two other pieces of legislation this spring with an eye toward price transparency in cattle markets—the “50/14 bill” and the Cattle Market Transparency Act—both with bipartisan support.
But the Biden administration is focused on another big challenge for many cattle producers—ensuring that only meat from animals raised and processed in the U.S. can be labeled as such. As it stands now, American ranchers are often undercut by cheaper imported foreign beef, which can currently be processed in the U.S. after slaughter elsewhere and still be labeled as a “product of the USA.”
Biden’s executive order directs the USDA to “consider initiating a rulemaking” to define conditions under which the “Product of USA” label can be used, and the agency had already announced a week earlier that it would be “initiating a top-to-bottom review” of the label. Trump’s USDA had indicated it would start the rulemaking process in 2020, but did not make progress.
So far, most groups that represent ranchers support closing loopholes in “Product of USA” labeling, but some, including R-CALF and the U.S. Cattlemen’s Association, believe the only thing that will truly tip the scale back towards American producers is reinstating Country of Origin Labeling (COOL) on meat. Agriculture Secretary Tom Vilsack has made it clear that he’s committed to strengthening the “Product of USA” label, but he says that revisiting COOL is not on the table due to international trade agreements.
The other major component of both Biden’s executive order and recent USDA announcements that would have significant implications for both beef producers and pork and poultry growers is rulemaking related to the Packers and Stockyards Act, which gives farmers and others involved in meat production a means to protect themselves against “unfair, deceptive, unjustly discriminatory, and monopolistic practices” in the industry. Although the law was passed in 1921, the USDA has failed to implement rules that would make the law truly enforceable. Similar to “Product of USA,” Biden’s executive order directs the USDA to “consider” making those rules, which isn’t the strongest language, but the agency already started the process nearly a month earlier.
In a way, Vilsack is picking up where he left off. Under President Obama, his USDA came up with a set of rules referred to as the GIPSA rules, for the Grain Inspection, Packers and Stockyards Administration, the agency within USDA that was set up to implement them.
But they were delayed, watered down, and ultimately dismantled under President Trump. Just before leaving office, Trump’s USDA finalized one rule related to “undue preference,” meant to prohibit companies from conferring advantages on one producer over another, but advocates generally said it was too weak to have any real teeth.
“After all of that, the only thing we were left with was undue preference, and all it was doing was supporting what the industry was already doing,” said Craig Watts, a poultry farmer turned whistleblower who advocated for the GIPSA rules in D.C. for years. Watts is skeptical of Vilsack’s efforts because of the lack of results from his previous term in charge of the USDA,, but this time around he’s heartened by the agency’s stated intent.
In addition to proposing a new rule to strengthen undue preference protections, the USDA will propose rules related to fairness in the poultry grower tournament system, and, most importantly, he said, it will put into writing the fact that a producer doesn’t need to demonstrate “industry-wide harm” in order to sue a company under the Packers and Stockyards Act. That distinction is crucial, Watts said, because the law currently makes it incredibly difficult for a grower to sue a processor for anti-competitive behavior. “One individual farmer, because a company did him wrong, had to prove it harmed competition in the whole industry,” he said. “It’s impossible.”
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In addition to tweaking rules to give farmers and ranchers more power in the consolidated marketplace and a commitment to “enforce the antitrust laws to combat the excessive concentration of industry, the abuses of market power, and the harmful effects of monopoly and monopsony” (a market where there is only one buyer, as opposed to a monopoly with only one seller), these recent federal moves also address the flip side of the issue: increasing competition by investing in a more diverse playing field.
The agency announced it will use $500 million in funds from the American Rescue Plan to “support new competitive entrants in meat and poultry processing” with loans, grants, and technical assistance and $150 million to help existing small processing plants expand their operations. That’s in addition to other initiatives intended to make small processors more competitive, like expanding programs that allow smaller, non-USDA inspected plants to ship their meat across state lines.
During the pandemic, small and mid-size processing plants faced unprecedented demand, and processing back-ups were so significant that many small farmers are still struggling to get their animals slaughtered on time. Advocates say investment in small and mid-size plants will give small farmers a leg up and increase competition in the marketplace.
“[This] is the part of this that is going to make real fundamental change,” NFU’s Larew said. “We need the antitrust piece to break up this consolidation, and we need to restore some power to producers, but we also need to back that with capacity for more local and regional food systems.”
Of course, all of these announcements will require significant follow-through, and as rules are made, the administration will have to consider comments and input from various parties. NAMI, for example, has already stated it will participate in the “Product of USA” rulemaking process.
Watts, for one, is cautiously optimistic. “We haven’t made any progress in making the poultry industry better for the farmer since I [started], which was in 1992,” he said. “They say they’re ready for change, and I’m hoping that’s what they’re going to make happen. Coming from a farm, we always think that tomorrow’s gonna be better.”
Lisa Held is Civil Eats’ senior policy reporter. Her stories on the food system, sustainable agriculture, and food policy have appeared in many publications, including Eater, NPR’s The Salt, and Edible Manhattan. She also produces and hosts the weekly podcast “The Farm Report” on Heritage Radio Network. In the past, Lisa covered health and wellness for publications including the New York Times and Women’s Health and was an editor at Well+Good. She is based in Baltimore and Washington, D.C. and has a master’s degree from Columbia University’s School of Journalism. Read more >