Why do four big companies control the American beef and meat industry?
June 21, 2021
U.S. lawmakers seek to tighten oversight of the beef industry as concerns about anti-competitive behavior rise after the pandemic and a cyberattack on a large meat company, JBS USA.
A feature article by Reuters explains that agriculture officials simultaneously demand more processing capacity and ranchers are opening new slaughterhouses after plant closures have highlighted the industry’s dependence on large facilities run by four main processors.
What is the concentration of the American beef sector?
Four companies slaughtered about 85% of grain-fed cattle in the United States that are processed into steaks, roast beef and other cuts of meat for consumers in 2018, according to the most recent data from the United States Department of Agriculture ( USDA).
Including other cows used to make hamburger meat, companies account for about 70% of total beef production in the United States, according to the North American Meat Institute, an industry group.
Which companies control the sector?
The four major processors in the US beef industry are: Cargill, a global commodities trader based in Minnesota; Tyson Foods Inc, the chicken producer who is the largest American meat company in terms of sales; JBS SA, based in Brazil, the world’s largest meat packer; and National Beef Packing Co, which is controlled by Brazilian beef producer Marfrig Global Foods SA.
When did these companies take control of the sector?
The number of cattle slaughtered by the four companies rose from 25% in 1977 to 71% in 1992, according to USDA data. Increases were also recorded for other animal proteins such as chicken and pork. A move to larger processing plants has led to a sharp increase in concentration in cattle slaughter, the USDA said in a 2000 report.
Why have the plants grown bigger?
Meat packers are able to reduce the cost of processing each animal by performing larger operations instead of smaller facilities.
In 1977, 84% of American steers and heifers were slaughtered in factories that killed less than half a million cattle a year, according to the USDA. In 1997, factories in this category saw their share drop to 20%.
Why is industry consolidation in the spotlight?
Three separate events in 2019, 2020 and 2021 highlighted the country’s dependence on large beef factories run by the four largest processors.
First, a large Tyson Foods plant in Holcomb, Kansas, closed for four months following a fire on August 9, 2019, which reduced beef production in the United States and shut down a market where farmers could sell. their cattle.
The second disruption came during the spread of COVID-19 last year, leading to the closure of slaughterhouses across the country to contain outbreaks of the virus among workers.
On May 30, 2021, JBS detected a ransomware attack on its systems that temporarily shut down its beef and pork factories in the United States.
What Are Cattle Producers Worried About?
Pastoralists are frustrated with falling livestock prices when major factories close, while meat companies still benefit from rising meat prices. After the Tyson factory fire and the onset of the pandemic, the price differential between livestock and beef hit record highs, according to the USDA.
Plant closures suppress markets for ranchers to sell their animals and tighten the supply of meat by reducing production. Ranchers say there is too little competition among beef processors to buy cattle.
What is on offer?
Lawmakers have proposed legislation to create an office for a special investigator within the USDA to address concerns about anti-competitive practices in the meat and poultry industries.
The USDA has announced plans to strengthen enforcement of a 100-year-old federal law designed to protect farmers and ranchers from unfair trading practices. The agency is committed to supporting increased processing capacity as part of a $ 4 billion initiative to strengthen the country’s food system.
A group of US governors are pushing the Justice Department to continue an investigation into anti-competitive practices in the meat-packing industry.
The North American Meat Institute, which represents meat packers, said processors and ranchers “benefit from a fair and competitive market.”