Let's Stop Big Meat From Manipulating Prices

A farm bill amendment would stop meatpackers from being both buyers and sellers of livestock, an unfair market pressure on local farms.

The average grocery store may seem packed with variety. The cereal aisle has a dizzying array of options—five kinds of Cheerios alone. This variety is an illusion. A handful of food processors dominate most grocery store aisles and sell their products under multiple brand names. The milk case offers a good example. Dean Foods or one of its subsidiaries owns or sells the following brands: AltaDena, Berkeley Farms, Borden, Country Fresh, Garelick, Lehigh Valley, Mayfield Farms, Shenandoah’s Pride, Verifine, Horizon Organic, Organic Cow of Vermont and several dozen others.

This lack of competition is endemic to our food system. The four largest companies in each industry slaughter nearly all the beef, process two-thirds of the pork, sell half the groceries and process about half the milk in the United States. This is no accident. It’s the result of policies that Congress has passed on behalf of these large companies for decades. Current farm policy favors large industrial-scale agriculture and puts small and mid-sized farms at the mercy of market fluctuations. A wave of agribusiness, food manufacturing and supermarket mergers has worsened the problem. Consolidation has allowed a handful of companies that buy crops and livestock to dictate the prices to farmers.

Nowhere is this lack of competition more striking than in livestock markets. Meatpackers such as Tyson, Cargill, and Smithfield Foods wield unfair market power over farmers selling on the open market by buying livestock long before they need them. Meatpackers supply their slaughterhouses with a combination of cattle they buy at auctions, cattle they already own, and cattle secured with contracts with feedlots or producers, known as captive supply arrangements.

Since meatpackers with packer-owned cattle can be sellers, buyers or on both sides of a live cattle sales transaction, they can distort or manipulate prices. They can slaughter their own cattle when the cash price is high or purchase from contracted cattle or at auction when prices are low. These practices can drive down prices for other independent sellers and the large processing companies pay them less than what they offer large contract farmers.

These persistently low livestock prices create several problems. First, they push independent and small-scale farmers out of business. Although the overall number of livestock farms across the country has decreased, big livestock operations are getting bigger, with specific regions and states bearing the brunt of intensive animal production.

The 2008 Farm Bill included the first-ever livestock title that made some progress in addressing the lack of competition in the livestock sector. It directed the U.S. Department of Agriculture to develop new rules to ensure that livestock producers are treated fairly by meatpackers and poultry companies. The rules were proposed by the USDA in 2010 and would have protected farmers from unfair and abusive contracts with chicken processing companies and started to ensure that farmers got fair prices for their livestock.

The proposal would have prevented companies from offering sweetheart deals to factory farms or retaliating against contract farmers who spoke out against unfair treatment, but the meatpacker and poultry lobby derailed most of these common sense protections. Between 2000 and 2010, the meat and poultry industry donated nearly $7 million to candidates running for the House of Representatives.

This farm bill should be a place to change farm policy in a way that reins in the corporate control of the entire food system. Fully implementing the original livestock rules and other reforms are still needed to level the playing field for farmers and consumers. A good first step would be stopping meatpackers from owning livestock and manipulating cattle and hog prices.

Senators Chuck Grassley (R-Iowa) and Kent Conrad (D-North Dakota) introduced an amendment to the current farm bill that would ban meatpacker ownership of livestock. It should be added to the bill. Unfortunately, the amendment didn’t make it on to the final list of amendments that the Senate will actually vote on. (Remember that $7 million in agribusiness donations?) This is another missed opportunity to address unfair markets and corporate monopolies. Clearly we still need to build enough political power so that Congress listens to farmers and consumers instead of corporate agribusiness.

Photo (cc) Flickr user Wongaboo

Center for American Progress Action Fund

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