Brianna Johnson-King is a law student enrolled in the Harvard Law School Food Law & Policy Clinic and guest contributor on this blog.
COVID-19 has disrupted food supply chains, impacting farmers looking for butchers, meat processing facilities shutting down, and consumers concerned with availability and prices of meat at the grocery store. This disruption has led to potentially questionable conduct by some meat companies so much so that the Department of Justice (“DOJ”) has taken notice.
Market consolidation within animal agriculture has been an issue for over 100 years, dating back to DOJ’s antitrust settlement with the five largest meat packers in the United States and subsequent litigation over the legality of the DOJ’s push to break up the meatpacking companies’ control of the industry. Despite the government’s efforts to stop monopolization a century ago, today four companies control roughly 80% of the beef production in the United States, creating a more consolidated industry than when the five big companies controlled the industry in 1920.
The most recent issue stemming from this industry consolidation was brought to the forefront in June when the DOJ decided to investigate the top four meatpackers—Tyson Foods, JBS, National Beef, and Cargill. Specifically, the DOJ issued civil subpoenas to these four beef processors. Beef producers, or local farmers raising cattle, have suggested that prices are being artificially manipulated, allowing meatpacking companies to sell beef at high prices, despite paying low prices to farmers.
Prior to the DOJ’s decision to investigate the beef producers, Members of Congress sent letters to Attorney General Barr encouraging an investigation of “suspected price manipulation and anticompetitive behavior in the highly concentrated cattle industry”, including a letter from nineteen Senators and a letter from twenty-four House Representatives. These Members of Congress were encouraged by their constituents, including farmers, to investigate the “drastically declin[ing]” cattle prices and increasing beef prices to consumers. The Senate letter pointed to the 18 percent decrease in cattle prices and 115 percent increase in wholesale beef prices since February.
This manipulation is called price fixing and is possible because the top four beef meatpackers control about 85 percent of the “slaughter and packaging of beef.” Consolidated industries make it easier for a few large companies to collude, which in this instance potentially involved capitalizing on an economic downturn by charging artificially high prices. Price fixing results in meatpackers profiting at the expense of farmers and consumers, as farmers are paid less for their cattle and consumers pay high prices at the grocery store, causing an especially concerning impact on those struggling during COVID-19.
In addition to encouraging the breakup of industry consolidation, Congress should focus on aiding the economic viability of smaller producers and meat processors. These smaller farmers are being pushed out of the market by the difficulty of competing with large producers. Small producers can support local economics, provide high quality meat, and push back against the corporate consolidation. Recently, Congresswoman Pingree (D-Maine) and Congressman Fortenberry (R-Neb.) introduced the Strengthening Local Processing Act to aid smaller producers and processing facilities struggling to bring livestock to market, given that meat processing facilities are often at capacity and booked months in advance. This legislation would allow for increased slaughter and processing capacity by reducing the cost of meat processing plant inspections for states, thus enabling states to allow more processing facilities to open under their increased inspection capacity.
The meat processing difficulties that small producers face is only one example of barriers they face. Currently, meat processed at a state inspected, rather than federally inspected, location cannot be sold across state lines despite meeting or exceeding federal inspection standards. Congresswoman Liz Cheney (R-Wyoming) introduced legislation that would allow meat to be sold across state lines after a state-inspection.
These two proposed bills highlight a few of the difficulties that smaller producers face. In addition to getting meat to market, small farmers struggle to compete with the big four beef companies. Artificial price manipulation in a highly-concentrated meat industry exacerbates this problem. To improve our meat industry, it is important to stop price manipulation and antitrust violations, as well as for Congress to reduce barriers for small producers.
The views and opinions expressed on the FBLE Blog are those of the authors and do not necessarily reflect the official policy or position of FBLE. While we review posts for accuracy, we cannot guarantee the reliability and completeness of any legal analysis presented; posts on this Blog do not constitute legal advice. If you discover an error, please reach out to contact@farmbilllaw.org.
