Several members of Iowa’s congressional delegation want to rewrite the rules governing cattle sales. (Creative Commons photo via Pxhere.com)
Members of a key U.S. Senate committee called Wednesday for legislation to reduce the power of four large packing companies that control more than 80% of the cattle market.
In a call with reporters, Republican U.S. Sen. Charles Grassley of Iowa said many farmers are losing money on each animal while the packers make $800 to $1,200 on the same cow.
“Imagine how demoralizing that is,” he said.
At a Wednesday hearing of the Senate Agriculture Committee, Grassley said: “That is going to demand action by this Congress to take care of that unfair situation.”
The Iowa senator has called for action to improve transparency and accountability in the cattle market. On Wednesday, he said he also plans to call for a hearing on meat prices in stores, which have risen sharply without cattle producers also seeing higher incomes.
At Wednesday’s hearing, Grassley noted that 20 years ago, half of cattle sales were on a negotiated basis at the time rather than under contracts that have tended to reduce prices paid to farmers. Now, about 20% are negotiated at the time of sale.
Grassley asked cattle producer Justin Tupper of St. Onge Livestock in South Dakota, representing the U.S. Cattlemen’s Association, whether the lack of a large cash market for cattle was pushing prices lower.
“That is a definite yes. It (affects) it hugely,” Tupper said. “When the big four can have all of that captive supply so they do not have to go out and compete for those cattle, then they can push down the prices.” Farmers that used to get four or five bidders at auction might get one or two now, he added.
In his prepared comments earlier, Tupper said in 1977, the number of cattle slaughtered by the four largest firms — Tyson, JBS, Cargill and National Beef — accounted for 25% of total slaughter capacity.
Several speakers said those companies now control 80% to 85% of the market.
The North American Meat Institute, representing the packers, has said the market drives cattle prices and any “additional government intervention will have unintended consequences.”
“Longtime critics of the meat and poultry industry are again proposing additional regulations and shortsighted market interventions that do not consider the basic laws of supply and demand. Many of these proposals have already failed in practice or before the courts,” Meat Institute President and CEO Julie Anna Potts said in a statement. “The beef market is dynamic, with recent challenges due to labor shortages and the COVID pandemic rather than problems with market structure.”
At the hearing, Mary Hendrickson, an agriculture professor at the University of Missouri-Columbia, said the concentration of the industry has affected prices.
“The distribution of power in the food system, embodied in the power to make decisions about what food is produced, how, where and by whom, as well as who gets to eat and what they get to eat, becomes a focus of concern when that decision-making power is concentrated in the hands of managers and boards of directors of transnational agri-food companies,” she said. “To meet shareholder expectations, these firms look to their bottom line not their impact on farmers, communities, consumers or the natural world.”
Dustin Aherin, vice president and market analyst at Robobank, said the pandemic drove down cattle prices as packing facilities closed or reduced capacity.
However, Aherin noted, “Consumer demand for beef and all animal proteins has reached record levels, fueled by pandemic stockpiling, increased and reallocated consumer income, and more recently, restaurant reopenings, not to mention export demand. These dynamics, combined with elevated processing costs, have increased the spread between beef price and cattle price, just as economic principles, past research, and historical market relationships would suggest. Both the direction and magnitude of the price spread are well within the range of expectation.”
Aherin said the increase in beef prices is “frustrating from an optics standpoint” but is related to supply and demand. If cattle inventory falls later, farmers will see more income, he said.
Sen. Cory Booker, D-N.J, said the pandemic “shined a light” on questionable practices that were already there. “Consumers are paying higher prices for meat, while ranchers were paid less for their cattle, but the big consolidated companies really made record profits,” Booker said.
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