Let’s examine what harm would come to both the beef industry and consumers from the Trump Administration pursuing antitrust cases against the Big Four packers. Antitrust actions usually end up in fines for companies or forced divestitures.
One of the cattle industry’s greatest fears has been packing plant cutbacks or closures because they take bidders out of the market, reduce the percentage utilization of packing capacity and threaten the viability of both processors and feedyards in a region.
After all, it is simple economics that the larger scale of bigger packers allows them to spread fixed costs over more head and more pounds of beef. That keeps prices more affordable to consumers and moves big volumes.
Stephen Koontz, livestock economist at Colorado State University, led a team that examined Mandatory Livestock Reporting data and found that, on average, larger packers pay more for cattle within their region.
They need more cattle to operate plants efficiently; have more big-client retailers, steak chains and fast-food contracts to supply; and have more capital or better access to capital.
Bigger packers report data to the government twice daily, including prices paid for cattle, numbers purchased and boxed beef sales. What other industry is so regulated and monitored?
Breaking up larger packers that produce the biggest volume of beef at the lowest average cost would result in:
• Higher average beef costs to consumers.
• Higher average processing costs for the packing industry, fewer dollars for cattlemen.
• Supply disruptions as ownership changes.
• Buyers for fed cattle with needs for fewer cattle and less deep pockets.
Remember the American Beef Packers crisis when cattle feeders ended up with fed cattle shipped and bouncing checks?
President Donald Trump has tried to attract foreign capital to America, proud of countries that have pledged to bring it here. Antitrust actions could not only force foreign capital out but also disallow or discourage new industry investment. Car companies or chip manufacturers to come here is okay, but not meat processors?
Major meat packer Swift was for sale for years. Why did it languish? Investors look for return on investment. Processing yields roughly 2.5 to 3% profit. Packaged processed meats, like bacon, hot dogs or pre-cooked meats, can generate 10% or more.
JBS is involved in cattle harvesting because that’s what JBS does. They are meat-processing people. They hold that there is a market for everything a carcass yields—one just has to find whatever country or culture will pay the best price.
JBS brought capital into the U.S. beef industry when no one else did.
We’re not familiar with the ownership of National Beef. But they are leveraging foreign capital to buy top-quality cattle from high Plains feeders, supplying the market with top-quality beef and employing hundreds of American citizens and residents.
Beef packers have been losing hundreds of millions for months.
Beef prices are determined largely by supply and demand. The tight beef supply is primarily due to drought. The human factor is demand, painstakingly nurtured by multiple links in the beef production chain for decades.
One of the partners in the Beef Checkoff is the processors who collect the dollar on each head they buy.
That demand development effort is responsible for setting records in cattlemen’s pockets today.
It is the big packers that can afford long-term investment and the research, product development and creative merchandising support to retailers and foodservice customers; the monitoring of quality control in beef packaging and labs to test for residues and pathogens. We’ve visited the new product development centers at Cargill and Tyson.
We do need smaller processors. There are niches and markets and consumer demand for product the big packers cannot justify serving or cannot logistically handle at their scale, speed and volume. It should be up to smaller packers to identify and serve a need, not the government forcing a breakup of the big packers to determine how markets are served.
The beef industry cannot afford anti-trust moves to oust or discourage capital from any source. Packers here in America buy cattle from American cattlemen, employ people here and sell beef to consumers here and worldwide. Top quality beef is the industry’s concern, not a national security concern like advanced computer chips, drones or fighter jet parts.
The beef production chain from the semen tank through cow/calf producers, backgrounders, feeders, packers, retailers, restaurateurs, exporters and importers is finally being rewarded after decades.
We don’t need the government, with no valid justification, wrecking things just because we have finally tasted success. — Steve Dittmer, WLJ columnist
(Steve Dittmer is the author of the Agribusiness Freedom Foundation newsletter. Views in the column do not necessarily represent the views or opinions of WLJ or its editorial staff.)
