When shopping, consumers may notice how expensive it is to purchase beef. Shoppers purchasing only one pound of ground beef from a retail store can expect to pay over four dollars, and could be spending nine to twenty dollars to buy more expensive cuts of beef.
To cattle producers across the country, the expensive prices of beef may be puzzling as the market for live cattle is low. This has left many producers on the edge of collapse, and wondering why cattle prices are so low while consumer demand is increasing.
Usually, it would be expected to see meat prices decrease, as there is a high supply of cattle waiting for slaughter, but, because there are only four major meatpackers with almost complete control of the market, they can heavily mark up wholesale prices. This leaves retail stores with no choice but to further increase the already high prices.
In September of 2019, producers began demanding that action be taken in order to “rebalance” and create “fair cattle markets.” In a press release for the Western Ag Reporter’s Twitter campaign, statistics were cited saying while feedlots lose $15 per head of cattle on average, packing companies make a profit of over $200 per head.
Although this type of pricing has been going on for many years, attention was finally raised on the national level at the beginning of this year, partly due to the effects that COVID-19 had on meat prices. The closing of restaurants and other venues caused a decrease in beef demand, but because of panic buying, retail stores and meatpackers continued to up the prices of beef. Still, eventually, meatpacking plants were required to close, meaning there were fewer buyers for live cattle. Producers were forced to sell low, while meatpackers were making an even bigger profit.
The US Department of Justice and the Department of Agriculture have begun investigations on unlawful beef price-fixing. Allegedly, the four packing plants conspired to manipulate beef supplies beginning in 2015. Instead of buying the number of head that were demanded by consumers, packing plants limited the number they bought, making sure there was a shortage in the market. Due to the large number of cattle still on the market, they could purchase at low prices, and with not enough to provide to retailers, increase their profits at sale time.
The monopoly created by these packers working together has destroyed any competition that would be expected between the companies, allowing them to price fix and charge consumers above the fair market price without fear of them purchasing elsewhere.
So what is it that has caused this to happen? The main reason that the meatpackers can control the markets is that they have no competition. When retail stores have no other options, they must buy the overpriced meat.
Policies from the USDA have made it nearly impossible for producers to sell meat directly to consumers, or even for small packing plants to enter the market. In order to sell meat to restaurants, grocery stores, farmers markets, or directly to the public it must be inspected by the USDA, and in certain states, additional licenses must be acquired.
Within these inspection requirements, federal personnel must be present during all animal slaughter, as well as for at least part of the shift when packaging the meat. All meat must be inspected and labeled appropriately before it can be sold to any consumers.
Although these requirements are in place to make sure that citizens are sold a safe product, it makes it nearly impossible for small business owners and producers to sell the meat without going through a meatpacking company first. There is only one way to get around this, to sell live cattle to consumers before they head to slaughter. Although purchasing part of a live cow may be cheaper in the long run than purchasing from a grocery store, most people don’t have the financial stability to make the one-time payment on even a quarter of beef.
Producers and consumers need to step in and demand that action is taken to ensure fair cattle markets, and prevent meatpackers from manipulating the market. The USDA should reevaluate their requirements for selling beef, thus allowing more companies and cattle producers to enter the market. Allowing more businesses to compete will lower the prices, as well as boost the amount and prices of cattle sold to meet the current demand. Importantly, meat packing companies must be investigated and charged for their market manipulation.
The problems within the cattle market are a perfect example for why our county must preserve the free market. When one agency determines the price and supply of a product, markets will never reach equilibrium, and neither consumers nor producers will be getting the products fair value.
The views expressed in this article are the opinion of the author and do not necessarily reflect those of Lone Conservative staff.