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This is our first entry in the new Antitrust Series, in which we study concentrated corporate power, industry calcification, political influence, and – of course – policy solutions. We’ll revisit this series from time-to-time.
Since 2020, Americans have experienced rising food prices while farm closures have ticked steadily upward. Inflation and supply chain issues stemming from the pandemic have been explicitly or implicitly blamed in the news. However, the inflation narrative overlooks a more endemic, structural problem with the industry at large.
Through a string of unchecked acquisitions over 30 years, Tyson Foods, Cargill, JBS USA Holdings, and National Beef have gained control of roughly 85% of the total hog, cattle, and poultry processing market. For brevity, we’ll call these four meat processing corporations “BigAg” (or “the cartel”).
As we conducted our research, we found example after example of clearly negative economic outcomes for consumers, workers, and farmers tied directly to BigAg’s dominance. The upshot? There are policy solutions and hope for a better food system as a whole…if our elected officials would kindly act on them. We’ll go over 3 effected groups and discuss policy solutions at the end of each section.
🛒 Consumers
Let’s start at the checkout aisle. There have been high inflationary periods throughout history, but none have been driven as much by corporate profits as the inflation spike of 2021-2022. In theory, if everything including raw materials and labor get more expensive, prices will increase but profit margins should not. But when we overlay BigAg’s input costs and prices consumers pay, we see the following:
In this chart, price changes (“store price change”) may seem consistent with various inflation-related price increases. But importantly, the producers’ input costs – a leading indicator of what consumers will pay – diverges from the the price consumers end up paying in grocery stores. Looking forward, more consolidation in the market also opens the door to further price increases as meat products are sourced from BigAg as opposed to in-state, regional, or local sources (higher transportation costs).
The chart is an example of profiteering/price gouging at a time when Americans are finding it harder to get by financially. But taxpayers are actually paying BigAg twice: once at the checkout aisle and again via taxes. Namely, through the Farm Bill.
The Farm Bill sets the food policy for the country. Most of the provisions in it – 81% – go to SNAP programs (colloquially called “Food Stamps”). Meanwhile, the other 19% increasingly benefits BigAg. Congress renews the bill every 5 years; it will be renewed again this year. The non-SNAP provisions cost taxpayers $165 billion in 2018 and are slated to cost $287 billion in 2023 with the passage of a $1.51 trillion dollar renewal (the largest in US history).
Tyson’s operation covers roughly twice the land area of New Jersey at about 10 million acres or 22,500 times the size of an average farm. That’s a lot of insurance for taxpayers to cover.
Proposed Policy Solutions: Break up the 4 meat processors to promote competition and honest price discovery. Expand the Packers & Stockyards Act to monitor margins on meat products, prevent opportunistic price gouging/fixing, and prevent further acquisitions.
