Another factor in food production: giant corporate control

I’ve been reading extensively about factors affecting the food supply pipeline in particular, ever since this became an issue during the COVID-19 pandemic.  I came across a very interesting article from 2011, examining the meat-packing industry and the problems it’s causing for ranchers and farmers.  It’s ten years old, but from what I’ve been able to confirm, the situation has only grown worse since then.

It’s a very long article, but worth reading in full.  I’ve chosen one excerpt to whet your appetite.  (Remember, the statistics date from ten years ago.)

The price a rancher gets for beef, adjusted for inflation, dropped from $1.97 to 93 cents per pound between 1980 and 2009 … The number of U.S. cattle producers has plummeted from 1.6 million in 1980 to 950,000 today … Four giant companies — Tyson, Cargill, Brazil-based JBS, and National Beef — now control about 80 percent of the U.S. beef market.

. . .

The meatpackers’ power derives from the industry’s structure, which resembles a pyramid. At the bottom are the “cow-calf” producers — mostly hundreds of thousands of mom-and-pop operations. They’re the ranchers who cope with feeding and calving in the depths of winter, graze their cows on private pasture and public lands in the summer, and then round them up for sale, either to a feedlot or to a “backgrounder” who fattens them up for resale to a feedlot. The feedlots typically keep the cows for only a few weeks of a get-fat-quick diet and then sell them to the meatpackers. There’s just a brief window of time when the cattle can be sold at their prime — and that gives the meatpackers leverage.

Randy Stevenson, who owns Double S Livestock LLC, a 6,000-cow-capacity backgrounding operation in Wheatland, Wyo., says he’s felt the packers’ power. From 1985 until a few years ago, he ran a feedlot, but his meatpacker troubles led him to switch to backgrounding, where he can sell to feedlots instead of packers. “I got educated on this out of necessity,” says Stevenson, who attended the Fort Collins workshop.

Beginning in the 1990s, Stevenson explains, the number of cattle buyers coming to his feedlot dropped to the point where he’d have just one stopping by once a week. That made it impossible for him to bargain among buyers and get the best price for his cattle. One time a few years ago, a lone “field buyer” stopped by and offered $1.03 per pound for the four truckloads of cattle on Stevenson’s lot. Stevenson says he tried to negotiate by offering to throw in five more truckloads if the buyer could offer $1.04. The buyer went back to his office to call his boss and ask if he could bid higher for the larger quantity. Then he called Stevenson to relay a counteroffer. “The field buyer was kind of grumbling,” Stevenson recalls. “I said, ‘Well, what’d (the boss) say?’”

“‘Tell him to go to hell,’” said the buyer. “‘It’s two and a half if they want to do anything.’” The boss had gotten so angry at Stevenson for trying to negotiate a better price that he dropped his offer a half cent per pound — just to teach the feedlot owner a lesson in who really controlled the deal, Stevenson says. And since Stevenson’s cattle were ready, and he had no one else to sell to, that was the price he ended up taking.

“This situation is what I call economic waterboarding,” says Stevenson. It happens when sellers are limited in who they can sell to — one meatpacker instead of 20. The impacts are obvious: 30,000 small feedlots have closed shop in the past 15 years, says R-CALF’s Bullard.

Cattlemen have another word for what’s happening: “chickenization.”

More than 90 percent of all poultry in the U.S. is now raised by growers who don’t own the birds or negotiate basic terms like price per pound. Over the past 50 years, chicken packers (known as integrators) like Tyson, Perdue, and Pilgrim’s Pride have talked chicken farmers into signing contracts that lock them into a relationship, rather than selling and buying birds on the open market. At first, farmers were pleased, because it gave them a guaranteed sale and a price they could count on. But over time, as the big poultry packers gained control of the majority of chickens raised in the U.S., the terms of the contracts deteriorated.

Many chicken farmers these days are forced, contractually, to invest hundreds of thousands of dollars in chicken houses that meet ever-changing packer specifications for feeding systems. Farmers often start off with five-year contracts and invest based on the assumption they’ll be in the business long term. After the initial contract period, though, poultry packers sometimes shorten contracts to a year or even a few months, putting more pressure on the farmers to cooperate. Meanwhile, nearly all chicken farmers get their chicks from the poultry packers. Sometimes the chicks are puny because they come from either very young birds or very old ones that tend to lay small eggs. The poultry packers constantly experiment with different breeds to find chickens that gain weight more rapidly, but it’s just the luck of the draw as to which chicks a farmer gets. Since farmers are paid by how well their chickens convert feed to weight, any farmer with a puny flock will do worse than other farmers. About the only way a farmer can get ahead is by investing in pricey technology that may give him a bit of an edge over his neighbor.

It’s a perfect system from the poultry packers’ perspective: The chicken farmers take on the risk and the capital investment, and the packers can cancel their contracts at almost any time. Many chicken farmers complain about take-it-or-leave-it contracts and financial promises that never come true. But if they protest or look for a different buyer, retaliation may follow in the form of contract termination — leaving the farmer deeply in debt, surrounded by piles of chicken manure, a pollution liability, and with no alternate buyer to turn to, since there is frequently only one buyer in a region.

In Fort Collins, Vilsack said that during an Alabama hearing on competition in the poultry industry last May, many farmers complained about their contracts being shortened to 90 days — which he called “flock-to-flock contracts” — and “we heard many stories of people who were reluctant to speak because of fear they’d be retaliated against.”

That’s what it means to be chickenized. And hog farmers have experienced the same.

There’s much more at the link.

Perhaps the farmers among our readers could tell us in Comments whether they still find this same problem, or whether it’s gotten worse or better.  Sources I’ve consulted say it’s the same or worse (usually the latter).

The COVID-19 pandemic has led to the rise in popularity of an alternative for farmers and ranchers.  People are becoming “locavores“, buying produce locally from farmers they know, usually paying higher than supermarket prices, but getting fresher, higher-quality produce.  For example, there are several small ranchers in our area who sell quarter-, half- or full cows directly to consumers.  The price works out (at present) to about $6 per pound, hanging weight, which sounds expensive until you realize that’s across the entire selection of cuts.  Your ground beef costs $6 per pound, which is high;  but so does your filet mignon or sirloin steak or standing rib roast, which is very reasonable indeed.  I guess it averages out about right.  You can also specify (within reason) how you want your half-cow cut up, roasts or steaks or ground beef.  (You’ll need enough freezer space for everything, of course.  Half a cow is a lot of meat!)

If large food processors and distributors are going to be hamstrung by the supply chain logjam, we might all do well to start establishing contact with local suppliers and getting on their customer lists.  It won’t do to wait until there’s nothing else available, only to be told that your neighbors have got in ahead of you and there’s nothing left.

Peter