Cattlemen vs. Meat Packers
by Madison Borkman
In the world today, our fellow Cattlemen are facing a great problem. That issue is the difference in profit that they make off their beef versus the amount that the meat packers make. To simply break that down; the ranchers are receiving a small profit for their well grown beef, and the packing companies are selling it to consumers at a skyrocketing price. In fact, Mary Hennigan writes in an article for The Counter, "according to the U.S. Department of Agriculture, the gap between the retail price for beef and the price producers receive is the largest it's ever been". The longer than this continues, the harder it will be for ranchers to keep raising beef. This will also have consumers struggling to find beef in stores, and if they do, paying an outrageous price for it. To put this all into perspective, the major beef packing companies have had an increase in profit of anywhere between 34% and 66% from 2010 to 2020. On the other hand, ranchers have had a great decrease in profit by about 10%.
You may be wondering why this is all happening? Some say that there's not enough capacity, or the number of slaughterhouses to process the amount of beef that is produced. In order to try to solve this problem, "Agriculture Secretary Tom Vilsack announced the USDA would spend half a billion dollars to encourage building more meatpacking plants closer to producers" according to the Associated Press. Although this is a great step towards saving our farmers and the beef market, the process will take time. This long-awaited solution will only help some. More steps are needed to be taken in order to completely fix this issue.
Another way that the Senate and the USDA are attempting to even the playing field is by making meat packers negotiate prices weekly. Typically, a formula contract is used by packers. The formula contract ensures that the packers will be taken care of, but farmers are made unaware of what they will be paid for their cattle. Therefore, this negotiation of prices is supposed to create higher bidding and more profit for the producer.
According to an article from Beef Magazine, "a band of Midwest feeders and ranchers have taken the radical step of buying a piece of the packing". In addition to this, "USPB gained a stake in the packing industry through a joint venture with Farmland Industries. The agreement allows them to purchase up to half of Farmland's National Beef Packing Co., the smallest of the Big Four packers." This will allow the producers to have a leg in the packing industry. Vertical Integration has also been introduced in the industry of ranching, feeding, and meat packing. Vertical integration allows the different segments to work together on the problem of demand. The process is done under corporate management. Beef Magazine also states that "vertical integration is 'from the bottom up,' says Hunt. That means producers control their own destiny through ownership".
Consumers are also affected by the beef market, but in different ways. Many think that the beef prices are so high because of the demand for it. This is not specifically true. Most do not know that the beef industry is actually experiencing an overproduction. Packing companies and slaughterhouses cannot keep up with the amount of beef that is produced. Expectedly, when beef prices are low, consumers purchase more. Yet, when they are high, they buy less. For example, an article from Farm Progress tells us that "The July-September 2021 quarter saw 6.0% lower per capita beef consumption than during the same three months in 2020, and inflation-adjusted retail beef prices rose 5.9%". In my opinion, if the high beef prices continue, people will only buy small amounts if any. Therefore, producers will eventually discontinue the growth of beef. So, some day consumers may have a hard time even finding beef in stores.
For more information, I spoke with a friend of mine who raises beef and has experienced this firsthand. He states, "There is not enough room in slaughterhouses to accompany the beef that's produced. So we have a hard time getting any money for our cows. We end up spending more on them than we make. Now that beef is so expensive in the stores, people aren't buying as much. This causes overproduction in the industry" (Roderick).
This problem is making it hard for ranchers everywhere to continue producing beef. Consequently, these people will have a big loss in income and will have to find a new way to make ends meet. It is sad to see the people around us going through these tough times which they cannot control. The packing companies truly have all of the control. They know that ranchers will take a very low amount for their beef just to get them sold.
To conclude, beef producers are forced to take a low price for their cattle. While meat packers are making an outrageous amount of profit. The cost of beef in stores has risen tremendously, causing consumers not to purchase it. On the positive side of things, the USDA, and others, are taking steps to even things for the segments of the industry. Yet, this process will take a great time to solve the problem