‘Oligopoly’ in cattle marketing demands action, say senators
With Sen. John Thune decrying an “oligopoly” in the beef industry, a handful of senators on Wednesday called for Congress to give cattle producers a fairer shake when they send their stock to market. Iowa Sen. Chuck Grassley growled during a Senate Agriculture Committee hearing that assurances that low cattle prices will improve eventually “isn’t going to work for farmers in my state” while packers profit from high retail prices.
“That is going to demand action by Congress to take care of that unfair situation,” said Grassley, sponsor of a bill to require packers to buy half of their cattle on the spot market no more than 14 days before slaughter. Other members of the Senate Agriculture Committee, such as Sen. Deb Fischer of Nebraska, have filed bills to require packers to buy a specific number of cattle, varying by region, on the spot market.
The bills are intended to assure a robust cash market for cattle to make sure producers get a fair price. Roughly three of every four head of slaughter cattle are sold under contracts or through price formulas that reward producers who met criteria set by packers. Four companies account for 80% of U.S. cattle slaughter.
Thune, of South Dakota, saying that more competition is needed in cattle marketing, lamented “the fact there is an oligopoly” in the packing industry.
‘We’ve got work to do,” responded Agriculture Committee chair Debbie Stabenow of Michigan. New Jersey Sen. Cory Booker, sponsor of a bill to ban packer ownership of cattle more than seven days before slaughter, said, “There is so much in this system that is unfair and working against producers.”
Economist Glynn Tonsor of Kansas State University said low market prices are a result of cattle supplies that exceed the capacity of slaughter plants. Beef prices in grocery stores rose last year because COVID-19 outbreaks slowed production at processing plants. “Going forward, it is generally expected that fed cattle volumes will decline and some physical processing capacity may be added.”
Dustin Aherin of Rabobank said the imbalance in cattle numbers “is going to change over the next several years. The cow herd is going to decline.”
Without the so-called alternative marketing arrangements that are the bogeyman of activist ranchers, “I believe cattle prices would be lower as production efforts would not align as well with consumer demands,” said Tonsor.
Kansas rancher Mark Gardiner, chairman of U.S. Premium Beef, said the emergence of alternative marketing arrangements, such as value-based marketing, was a boon for producers who could raise high-yielding cattle as opposed to the “one price fits all” price of the cash market. Alternative marketing arrangements “actually are best for the smallest producer,” he said, because they are rewarded for good management. U.S. Premium Beef, a processor, describes itself as “North America’s premier producer-owned vertically integrated beef company.”
Justin Tupper, vice president of the U.S. Cattlemen’s Association, said concentration in the beef industry means fewer bidders, and lower prices, for fat cattle. “They [packers] can push down the prices,” he said. “Every time we gain in efficiency, we lose in competition.”
Associate professor Mary Hendrickson of the University of Missouri said the pandemic showed the U.S. food system is brittle. “It is important to regionalize the food system,” she said, so there is a diversity in ownership and plant size that creates a “fail-safe” network that remains functional during upheavals.
To watch a video of the hearing or to read written testimony, click here.
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