Consolidation in the beef industry has significantly impacted local beef producers, but new legislation may provide some relief.
President Biden signed an Executive Order on Promoting Competition in the American Economy to create a fairer, more resilient, and more dynamic economy because too many industries were dominated by large companies that controlled the business. Prices rose and options decreased for American families while small businesses and entrepreneurs were pushed out of competition. The meat and poultry processing sectors are a textbook example of how the lack of competition hurts consumers, producers, and our economy.
According to Missoulian.com, ranchers are suffering financially because the current cattle market business model is no longer viable. Democratic Senator Jon Tester recently testified that four corporations have control of 85% of the nation’s beef supply. Consumers pay more for meat and poultry, while ranchers’ earnings become no longer economical.
The Cattle Price Discovery and Transparency Act of 2022 (S 4030) is a compromise cattle market proposal that sets minimum thresholds for privately negotiated purchases of fed cattle by large meatpackers. The act encourages investigation of cattle, hog, and poultry industries for anti-competitive practices because it is clear that today’s cattle market is primarily beneficial to packers, but disadvantageous to ranchers and consumers.
The focus now is on increasing competition in the meat processing industry for reduced food prices with the USDA planning to invest $1 billion to help independent slaughterhouses expand. The effort is not without pushback from the meat-packing industries. Large beef processors argued that “supply and demand factors, not anticompetitive behavior, drive the price of beef and the amount ranchers receive for cattle.” (www.mynorthwest.com)
All participants in the fed cattle market have a responsibility to contribute to regionally sufficient levels of negotiated trade of fed cattle in all cattle-feeding regions in order to achieve robust price discovery. The Warren-Jones Prohibiting Anticompetitive Mergers Act “addresses the problem of rampant industry consolidation by (1) banning the biggest, most anticompetitive mergers, (2) overhauling the merger-review process to allow the FTC and the DOJ to reject deals without a court order, and (3) strengthening the agencies’ tools to break up harmful mergers. By empowering our antitrust agencies to tackle consolidation head-on, this bill will promote competition and protect workers, consumers, small or minority-owned businesses (including farms and ranches), local, rural, or low-income communities, communities of color, privacy, and innovation.”
It will remain to be seen if the pace at which regulatory changes can be implemented will have the desired impact in time to help those local ranchers that are struggling now. Regardless, funds are potentially available to help now through USDA loans and grants.
CITATION:
At Senate Ag Committee, Tester Testifies in Support of His Bipartisan Anti-Consolidation Legislation
https://www.federalregister.gov/agencies/grain-inspection-packers-and-stockyards-administration
https://afpc.tamu.edu/research/publications/files/715/BP-22-4-Cattle-Market-Transparency.pdf
https://www.beefmagazine.com/commentary/so-whats-all-fuss-over-price-discovery