Fifteen years ago, in responding to the question of why producers were receiving so little for their livestock, Dr. John Helmuth (economist, meat industry expert, and longtime critic of meat industry consolidation) said, “There is an economic term to describe this phenomenon: It is called stealing.”
Compared to a competitive time in the industry in the 1970’s, the monopoly power of the big retailers and meat packers has left today’s cattle producers nearly $600 per head short of their share of what consumers spend for beef at the retail meat counter. According to USDA data, there has been nearly a 20% loss of the consumer dollar at the farm gate since 1975. The economies of scale and efficiency arguments that enabled today’s unprecedented concentration have destroyed the competitive marketplace while removing nearly half of our ranchers from the land. The market power gained through concentration and consolidation has provided the big retailers and meat packers the ability to extract record unfair profits from both producers and consumers.
“A modern plantation system is what it is,” said Robert Taylor, a professor of agriculture economics at Auburn University as quoted from Obama’s Game of Chicken
Weapons of Market Destruction:
– Unregulated concentration and consolidation
– Cooperation replacing competition among biggest packers
– Price leadership by dominate packer
– Captive supplies including:
* Packer ownership of livestock
* Forward Contracts
* Formula contracts (equiv: nuclear warhead)
– Allocation of territory
– Manipulation of futures market
– Talking the market lower (mentally conditioning seller – bidding not-to-buy)
– Agency capture – USDA shields big packers from P&S Act
At an average slaughter weight of 1,350 lbs., and the average retail price of $5.35/pound, a finished animal is worth around $3,033 per head at Walmart, King Soopers and Safeway.
Retail yield is approximately 42% of the live weight on the typical slaughter animal. 1,350 lbs. x 42% = 567 pounds of retail meat at $5.35 cents per pound equals $3,033 value per head at the retail meat counter.
Additionally, the packer is making approximately $190/head ($14.11 x 1,350 lbs.) on the By-Product Drop Value.
The producer of cattle invests over 85% of the capital, nearly all the labor, nearly all the management, takes nearly all the risk – and today, while consumers pay record high prices for beef, they go broke – it’s called stealing: