Facts can be stubborn and they can be fickle. It all depends on who is using them and how. When I began my career in journalism in 1973, my bosses drilled into me the ABCs of good writing: accuracy, brevity and clarity.
As I have watched recent pronouncements about beef packer power, concentration and plant capacity, I have dearly wished that my ABCs applied to various groups and lawmakers. For they have made claims about concentration that are factually wrong. The most common mistake is to take the four-firm concentration number for steer and heifer slaughter and claim that the four largest packers control 85 percent of the total beef market.
USDA’s latest concentration number for steers and heifers was 85 percent in 2015. My number, based on actual slaughter data, was 83.7 percent in 2019. The percentage for total commercial cattle slaughter, from which comes all domestically produced beef, is much lower. The four largest firms in 2019 had a combined market share of 73.3 percent.
Another point, which is reflected in USDA and my data, is that market share of the four largest packers has changed very little during the last 20 years. Claims that concentration levels in beef processing have sharply increased is simply not true. My data shows that the largest three firms first increased their market share for commercial cattle slaughter above 60 percent in 1992. It has stayed above that percentage since then, but did fall back to 58.3 percent in 2006 and 58.7 percent in 2008.
Some of the claims by politicians and others about packer power and lack of capacity inevitably have led to action by the Biden administration. It recently announced it has committed $500 million to expanding processing capacity in the meat and poultry industry. USDA will do this so that farmers, ranchers and consumers have more choices in the marketplace, says USDA. It will also offer more than $150 million to existing small and very small processing facilities to help them weather COVID-19, compete in the marketplace and get the support they need to reach more customers.
All this is laudable on the surface. But it begs several questions. The beef industry already has ample slaughter capacity and will get more in the next two or three years. The industry needs more workers, not capacity, as I wrote in my June column. Neither the National Cattlemen’s Beef Association, which thanked President Joe Biden for his actions, nor USDA, which released an unusually long statement about the moves, made any reference to the lack of labor.
Another question is how USDA’s money will be spent. Agriculture Secretary Tom Vilsack says USDA’s investments will spur millions more in leveraged funding from the private sector and state and local partners as USDA’s efforts gain traction across the country. Vilsack, as a former governor of Iowa, should remember that the state has plenty of meat plants that have ceased operations because of factors such as age, size and efficiency. How will USDA attract partners and convince them to build a new plant that might suffer the same fate? Meat processing is a highly specialized and demanding business that demands far more skills than throwing money into the sector.
The administration has also initiated several federal rulemakings specifically aimed at what it says are key concerns in the cattle and beef industry. These include: directing USDA to consider issuing new rules defining the “Product of USA” label on beef so consumers have accurate, transparent information at the grocery store; directing USDA to develop a plan to increase opportunities for producers to sell their product in fair, transparent and competitive markets; and directing USDA to consider issuing three new rules under the Packers and Stockyards Act to make it easier for producers to bring claims.
The first rule will clarify the conduct that USDA considers a violation of the Packers and Stockyards Act, including conduct that is unfair, deceptive, or unjustly discriminatory against farmers and growers. The second rule will address oppressive practices in chicken processing. The third rule will reinforce the longstanding USDA position that it is not necessary to demonstrate harm or likely harm to competition in order to establish a violation of the Act, says USDA.
These also sound laudable on paper, but the devil will be in the detail. How is USDA going to determine conduct that is unfair, etc., differently from the way it does now? As for establishing violations of the Act, how will that be determined? One can only shudder at the number of claims that will be made and the litigations that will flow. At the end of the day, the only group in America that will benefit will not be food producers or consumers, but lawyers. — Steve Kay
(Steve Kay is editor/publisher ofCattle Buyers Weekly,an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
