Producers want bigger cut of beef prices

Mike Dorning
Bloomberg
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Ranchers and cattle feeders are seething over a pattern they now consider all too familiar: the cost of hamburgers and steaks soar at the grocery store, yet the prices producers get for the animals barely budges. The market’s dominated by four giant meatpacking companies that together control more than 80% of U.S. beef processing.

“It’s a red-line level of frustration,” Colin Woodall, CEO of the National Cattlemen’s Beef Association, the largest trade association for cattle producers.

That ire is driving political momentum for more oversight of cattle markets just as antitrust and competition issues gain new traction in Washington, where a backlash against Big Tech is fueling broader concerns about corporate behemoths abusing dominant positions.

Beef cattle stand at the Texana Feeders beef cattle feedlot in Floresville, Texas, on May 7, 2018.

The Biden administration views the pricing patterns in beef processing as evidence that concentration is having damaging effects on the supply chain and rural America, a senior U.S. Department of Agriculture official said on condition of anonymity. USDA officials are looking at ways to use their regulatory authority to reduce the imbalance in market power, the official said.

Six farm and cattle trade groups this week united behind demands for meatpackers to disclose more information on cattle purchases, and for the Justice Department to publicly report on an antitrust investigation it launched last May into the four major beef processors. Sixteen members of Congress wrote the Justice Department the same day pressing for a progress report on the probe.

Lawmakers have introduced two legislative packages to require more transparency in pricing and terms of cattle purchases, in the hopes that it will give producers more leverage in transactions.

Rural lawmakers are sensitive to cattle producers’ pain. Beef cattle operations account for more than a third of U.S. farms and ranches, making it the single largest segment in the nation’s agriculture. Ranchers are also hurting from an expanding drought. Feedlot operators, who typically fatten cattle before they go to packers for slaughter, face soaring corn prices.

Meanwhile, packers are prospering. Tyson Foods Inc., the largest U.S. meat company, this month reported record margins of 11% for beef in its second quarter. The company’s stock is up 22% this year, compared to 9% for the benchmark S&P 500 index.

The stunning beef profit margins will eventually decline but remain above historical levels, Tyson’s Chief Executive Officer Dean Banks said at a conference Wednesday.

With pandemic restrictions easing, restaurants are reopening and buying meat. Flush with stimulus payments and improving incomes from a recovering economy, Americans have been willing to pay up for more expensive steaks and burgers.

Since March 12, the wholesale price of beef has shot up 43%, according to USDA. Cattle prices have risen only 5%.

Producers see a rerun of their plight during COVID-19 disruptions last year, when virus outbreaks slowed slaughterhouses, and the prior year, when a fire temporarily shut a meat plant in Holcomb, Kansas, said Woodall. Each time, beef prices soared while cattle prices dropped.

The spread between the price packers pay for cattle and the price they receive for wholesale beef keeps hitting new records, first following the August 2019 fire, and then after the pandemic hit. A USDA report that examined beefpacker margins reached no conclusion on whether prices were manipulated.

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