FShelly Ziesch was a North Dakota cattle rancher who needed to move some cattle. Feeding cows who had reached the necessary weight to make it profitable to stop feeding them was becoming too costly.
Only a couple buyers were bidding the day of the auction, driving down competition—and thus the ability for Ziesch to make a profit. She was stuck. With the Russia-Ukraine conflict driving up the price of feed, she couldn’t afford It is notThe cows will be sold to low bidders. “As a live product, we can’t just put [cattle] in a bin like we can with our grains and make a better choice later,” Ziesch testified during a Senate Agriculture Committee Hearing on Tuesday. At that auction, Ziesch estimates that she fell between $25,000 and $30,000 short in fair market value.
Ziesch admitted that it was an unfortunate day, but not unusual. As the four largest beef-packing companies have accumulated 82% of America’s beef market, the independent cattle ranchers such as Ziesch have been the victims of an ever more exploitative power dynamic. With few buyers available, they have two options: Sell their animals at auction at bargain prices or use murkier contracts to establish long term relationships with large buyers. A bipartisan group composed of Senators is now arguing that this dynamic is killing rural America. Independent ranchers are being forced out of work in large numbers, which leads to unpredictability in consumer prices.
“It always ends the same,” said Republican Sen. Chuck Grassley at the hearing Tuesday. “More profits for the packers and independent producers going out of business.”
Republican Senators. Grassley and Deb Fisher and Democratic Sens. Ron Wyden and Jon Tester have recently introduced the Cattle Price Discovery and Transparency Act. This bill addresses the problem. The bill would set minimum levels for how many cattle must be sold via certain cash sales, according to geographic regions. This would allow more transparency in pricing. The legislation would create a public library of contracts for marketing.
Six Republicans and six Democrats cosponsored a second bill that Tester introduced. It would strengthen anti-competitive enforcement of the wider meat market through the creation of a Special Investigator at the U.S. Department of Agriculture. The new Special Investigator’s unit would help enforce the 1921 Packers and Stockyards Act, which is supposed to enforce anti-competition rules but has seen its power curtailed by insufficient government resources. The bills passed both houses of Congress in hearings this week. They were then sent to markup, and finally to floor voting where full House or Senate could vote.
“We’ve seen a mass exodus off the land. Rural America is drying up,” Tester, a Montana Democrat and third-generation farmer, said Tuesday. “Consumers are being treated unfairly in the marketplace because there is no competition.”
Ranchers leave their businesses and corporate profits rise.
The process appears simple from outside: Cattle ranchers raise cows and then sell them off to feed lots. They sell the cattle to meat processors who turn them into anything, including hamburgers or hanger steaks. If there is no restriction on the market for products, they should only be selling at their market value.
But that’s now how it works in practice, says Sen. Grassley. Since the four biggest beef-packing firms have so much market power, they can use their leverage to pressure cattle ranchers away from cash trades, like auctions, and into what the industry calls “alternative market agreements” (AMAs). These AMAs (forward-looking contracts) are argued by big beef packers as they give ranchers security and help to build long-lasting relationships with buyers. AMAs, however, are not public and ranchers cannot determine fair market prices for their cattle. You cannot see what your neighbour is paying for their cattle without a marketplace.
The share of cattle that are sold via cash trades has declined over the past 15 years from 52% down to 20%. However, ranchers in certain states like Texas and Oklahoma have more frequent sales through AMAs than other states. And that’s happening hand-in-hand with ranchers’ profits tanking. In 1970, the annual farmers’ share of profits for beef and veal products was 64%, according to the Midwest Center for Investigative Reporting; now, ranchers average just 38%. According to an Open Markets Institute report, a think-tank that opposes monopoly, decreasing profits have forced independent cattle ranchers out of the business. According to the report, nearly 17,000 cattle ranchers went out of business every year since 1980.
Meanwhile, some of the biggest meat-processing companies—Tyson, JBS, Marfrig, and Seaboard—have seen their gross profits increase by more than 120% collectively since before the pandemic, and their net income skyrocket 500%, according to a December report by the White House.
Continue reading: Rising Meat Prices Congress is trying to do something about it
That’s bad for ranchers and rural communities, the lawmakers argued at the hearings. But it’s also bad for Americans’ wallets. A number of events over the years have demonstrated how fast consumer prices can vary when there is so little competition. When a fire broke out at a Kansas Tyson’s plant in 2019, wholesale beef prices jumped 10%. In 2021, ransomware attacks on JBS meat processor caused prices to soar 25% for boneless pork butts. Prices rose due to pandemic outbreaks in various meat processing plants. Grocery stores ran out of some cuts of meat as there was less meat packing companies to ship livestock to and therefore fewer options for customers to purchase meat from. The result was that ranchers were left with far too many animals, even though there was high consumer demand.
‘The cows no longer pay for themselves’
Fourth-generation Missouri cattle rancher Coy Young paints an illuminating picture about the downsides of market consolidation. Young described the numerous ranchers quitting and the decline in returns during the Wednesday House Agriculture Committee Hearing. “Everyone in the farming community has one, two, or three jobs outside of the farm in order to pay their bills and make ends meet. The cows no longer pay for themselves—and haven’t for a very long time now,” Young testified. “I never thought I’d see the day where feeding America would become a part-time job.”
If the problem is obvious, however, it may not be as simple to fix.
Some Senators suggested that the bill’s cattle pricing was too restrictive during Tuesday’s Senate hearing. Ranking Senate Agriculture Chair John Boozman acknowledged that cattle ranchers are frustrated by lower returns on livestock in contrast with rising consumer prices for meat, but argued that the cattle price transparency bill’s aim—to mandate a minimum threshold of cash sales versus AMA ones—could harm some geographic regions more than others, based on how dependent those regions currently are on AMA sales.
Boozman also raised concerns on the second bill, asking how a new Special Investigator’s office at the USDA would merely “duplicate functions” already performed by the USDA or other agencies.
Continue reading: U.S. Foods Prices are Up Is it the Food Corporations that are to blame for taking advantage?
Donnie King, CEO of Tyson Foods, the world’s second-largest meat processor, argued during the House hearing that basic market conditions like supply and demand, rather than market consolidation, is to blame for lower cattle rancher profits. A pandemic-induced labor shortage “resulted in too many live animals ready for processing and too few facilities staffed to properly process those animals,” King said in his prepared testimony, causing a “sudden and swift rise in oversupply of cattle [leading to] a corresponding sharp and swift drop in the market price for them.”
Julie Anna Potts, President of the North American Meat Institute, a trade group representing meat companies, says that the cattle price transparency bill was “designed to punish the largest companies and their suppliers.” Potts warns that Congress’ interest in applying mandates to sales mechanisms should frighten all sorts of companies. “The mandate is an antitrust tool that could be used in any industry,” she said in a testimony submitted to the Senate committee. “If a company gets too large, it will be punished with a government mandate directing how the company can purchase inputs. Such a government mandate should elicit opposition from anyone interested in protecting the free market.”
But while some have concerns about increasing government intervention in the meat sector, others argue the cattle price transparency legislation isn’t strong enough as written. Senator Cory Booker suggested that legislators consider requiring AMA sales to have a base price point in order for ranchers to be more leverage. “I’m concerned Senate Bill 4030 does not go far enough to address the dire state of cattle markets today,” he said at the Senate hearing Tuesday.
Continue reading: The Cow That Can Feed the Planet
Bill Bullard, the CEO of the Ranchers-Cattlemen Action Legal Fund, a cattle trade group, agrees that the bill doesn’t do enough to prioritize cash sales over alternative market agreements. “This is really a bill that is attempting to preserve for the meatpacking industry the alternative marketing arrangements to the greatest extent possible,” he tells TIME. “This is a serious crisis we’re in. We could soon reach the tipping point where we no longer have sufficient numbers of participants, or a competitive infrastructure to even sustain an industry.”
Ziesch says she hopes her ranch can continue operating under future generations—but that is only possible, she says, if there is a competitive industry for them to operate within. “I urge the committee to pass these two bills,” she told lawmakers on Tuesday “because they will provide my three daughters and my grandchildren the transparent and fair markets they need to carry on our family’s ranching tradition.”
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