Ranchers band together to break a monopoly on marketing
The next thing you might hear is a phone call from that same rancher to his or her congressman asking support for a ban on packer ownership of cattle. Packers are the people at the end of the line of raising a calf; they turn cattle into steaks and hamburgers.
Since 1980, the four largest beef processors in the country have increased their share of the steer and heifer slaughter from 36 to 82 percent. During those same years they've wrangled such a tight grip on cattle markets that their profit margins have soared 233 percent, while the price for cattle on the hoof steadily weakened.
According to the US Department of Agriculture, since 1975, ranchers get about $400less per head at the scales while the cost of almost everything else they need to survive "- fodder, machinery, labor, insurance and medicine "- has either doubled or tripled.
Of course the same thing has been happening to one degree or another throughout the entire agricultural economy, as giant corporations like Archer Daniels Midland gobble up midsized firms and use their massive buying power to depress the price of harvested food crops. But the meatpacking situation appears to be worsening. In fact, it's far worse now than it was at the turn of the century when ranchers were at virtual war with the packing houses, a situation that required White House intervention to settle.
Economic studies of monopolized industries indicate that when any market becomes dominated by fewer than six firms, fair pricing become compromised. So when over 80 percent of cattle are slaughtered and processed by four large firms "- Cargill, ConAgra, Farmland National and Tyson Foods "- we are inviting monopoly. Here's how it works.
The four large slaughtering and packing houses also own anywhere from 20 percent-to-35 percent of all cattle in the country. By holding a few million steers or hogs over the market every day, packers can keep wholesale prices down. By joining forces with larger retailers like WalMart, as Tyson recently did, they also exert a strong influence on retail prices. Who pockets the difference between low wholesale and high retail? Not the rancher.
"Packers have in fact gained an economic stranglehold on the independent cattle producer," says Jay Miller, chair of the market committee for the Ranchers-Cattleman Action Legal Fund (R-CALF). The group is headquartered in Billings, Mont., and represents 6,700 ranchers. Miller and his members have been asking Congress to ban packer ownership of cattle for more than 14 days before slaughter. Of course, the packers aren't sitting still for that kind of legislation and have recruited the American Meat Institute and a host of Washington lobbyists to represent their cause on the Hill.
Ranchers have struck back by filing class action lawsuits against three of the largest packers. Picket vs. IBP, Murdock vs. Excel (Cargill) and Leuking vs. ConAgra all claim that the packers in question use forward contracts and captive supplies in violation of the Packers and Stockyard Act, a trust-busting statute passed in 1921. No one is claiming that the big four are conspiring to fix prices: They don't have to conspire, it being easy enough to watch each other's supplies and bid less aggressively on the remaining cattle needed to meet demand. And when supplies get low, there's always cheap imported cattle to leave American cattlemen with herds at the ranch gates watching prices tumble.
"It was time to draw a line in the sand," says Jack Boehler of Orleans Nebraska, a plaintiff in the case against ConAgra.
Meanwhile, cattlemen's organizations like R-CALF have been pushing Congress to clean up the system. This spring, the Senate passed a farm bill containing a hard-fought ban against packer ownership of cattle. The House is considering the same provision. But the packers and their lobbyists are turning up the heat. A few strategically targeted campaign contributions could steer the ban right into a subcommittee trashcan.
It's interesting to note that all this is taking place in the midst of a much larger spasm of corporate CEO crime and depravity. The last American president who was bold enough to attack economic corruption head-on was Teddy Roosevelt, a pro-business Republican. Some people may recall his most memorable target for reform: the meatpacking industry.