Photo by unitedsoybean on Flickr.
Cattle prices hit historic lows in some parts of the country in November, even as the first shipments of Brazilian beef arrived in U.S. ports after the USDA’s recent decision to lift a 13-year-old ban on that country. Ranchers say the combination will likely drive many American ranchers out of business.
“It’s devastating,” says Herman Schumacher, a South Dakota cattle feeder. “We’re going to lose a whole lot more producers.”
Ranchers were commanding between $2 and $2.50 per pound of beef a year ago, but prices this year are hovering around $1.10 a pound. For a 750-pound steer, that could mean ranchers are getting paid more than $1,000 less per head of cattle compared to this time last year.
Simple supply and demand doesn’t explain the sharp decline. “We continue to have historically tight supplies. We have relatively strong beef demand,” says Bill Bullard, CEO of the Ranchers-Cattlemen Action Legal Fund. Producers should be enjoying stable profits, he says.
Bullard says the main problem is the extreme consolidation of the packing industry in most parts of the country. He and other ranchers are calling on regulators to enforce antitrust laws that would improve competition in the cattle industry.
“Something has gone terribly wrong, and the market is broken,” he says.
Consolidation does appear to have destroyed open and competitive cattle markets in most regions. Where several meatpackers once operated, today there may be just one or two buyers for a rancher’s cattle, and ranchers report that even where two companies operate they often refuse to bid against one another.
Nationally, the top four meatpackers, Tyson, JBS, Cargill, and National Beef, control about 85% of the market, and two especially are dominant. “JBS and Cargill are the main buyers most everywhere,” says Mike Callicrate, rancher and president of the Organization for Competitive Markets. Since 1996, an average of 11,000 ranchers have gone out of business each year
That consolidation is a main factor in the decline is also borne out by the fact that consumer prices remain high. The store price for beef has risen steadily for decades and has remained stable even as the price paid to ranchers has plummeted. According to data from the Economic Research Service of the Department of Agriculture, a pound of beef averaged around $3.60 in 2006, and around $6 in 2016. Data confirms that meatpackers and retailers are pocketing much of the growing profits.
The reopening of the U.S. border to Brazilian imports especially benefits JBS, the largest meat packer in the world. JBS entered the U.S. market in 2007 when it purchased Swift Foods, then the third-largest meat producer in the US. JBS also has a controlling stake in Pilgrim’s Pride, a dominant U.S. chicken company. JBS has close ties to the Brazilian government, having received a $360 million investment from a state-owned bank upon going public in 2007.
The Department of Agriculture banned beef imports from Brazil in 2003 due to fear of hoof and mouth disease. But the Food Safety and Inspection Service determined in August that importing fresh beef would not threaten domestic cattle. The first shipment of Brazilian beef, handled by JBS, entered the Port of Philadelphia in October. The port estimates that about 3,000 tons of Brazilian beef will enter there each month.
American ranchers believe the influx of beef from Brazil could further harm domestic producers. “[Importing beef] allows the packer to justify lower prices,” says Callicrate. Brazil is the largest beef exporter in the world.
Ranchers say the problem is further exacerbated by the repeal in 2015 of Country of Origin Labeling (COOL), which had mandated that producers label where their beef was grown. A broad coalition of U.S. independent ranchers supported COOL’s implementation in 2009. But the Obama administration last year overturned the law after a World Trade Organization challenge to the rule.
Many ranchers have redoubled their efforts to organize other producers to get the government to better regulate the giant beef packers. Bullard and Schumacher, for instance, jointly arranged a series of meetings around North and South Dakota for cattle producers, which were attended by some 1,500 producers. Schumacher says that many of the ranchers fear losing their businesses, including some who are brand new to ranching. “It’s really been a trying time,” he says.
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