Livestock Industry Changing
To say that rapid change is confronting the $60 billion a year livestock and red meat industry is to put the case mildly. In no other major industry is there a faster trend toward concentration of power in the hands of a few corporate giants. Automation is revolutionizing many older labor skills out of existence, and consumer tastes are changing toward other sources of protein like poultry, dairy products, fish and vegetables.
The goliaths of the industry are no longer Swift and Armour. Those two members of the historic five-member “beef trust” are declining factors in beef-packing. The two burgeoning giants today are Iowa Beef Processors (IBP), just purchased by Occidental Petroleum, and MBPXL, purchased in 1979 by the massive grain conglomerate Cargill.
IBP is the world’s largest slaughterer and processor of beef products. The 20-year-old company processed five million steers and heifers in 1979. MBPXL processed 1.7 million in the same year. Both companies have new plants, each with an annual slaughtering capacity of more than one million steers and heifers.
The market-share growth of these two companies is remarkable. In 1980, IBP and MBPXL controlled 30 percent of steer and heifer processing (double their market share five years ago) and about 45 percent of the U.S. boxed beef market. By contrast, the next-to largest boxed-beef firms together have less than 10 percent. Both IBP and MBPXL now are moving into pork. They will be directing their machinery toward portion control for restaurants and food services under nationally advertised brand names.
Where does this leave smaller meatpacking plants and cattlemen? The former are going out of business and the latter are in a state of near-panic. Sellers of steers and heifers are up against dominant buyers in the form of IBP and MBPXL, who are increasingly dictating the price they will pay.
What’s more, these two giants are determined to use other levers on their suppliers and competition, MBPXL’s parent company, Cargill, already is a major grain merchandiser, feed manufacturer and cattle feeder and is heavily involved in the commodity futures business.
When an industry becomes controlled by fewer and fewer firms, the likelihood of higher prices to consumers exists. Based on data submitted by the U.S. Department of Agriculture to the House Small Business Committee, the increasing concentration among steer and heifer slaughterers has raised the average of retail beef prices by 25.1 cents per pound over the period 1969 to 1978. This is equal to 30.1 percent of the total retail beef-price increase during that period. By way of indicating that this monopolistic overcharge is just beginning, the House committee warned about the coming period of brand-name advertising carrying this monopolistic momentum to the retail store level.
There are antitrust laws to be enforced by the Justice Department and the Department of Agriculture. The committee concluded that these laws are not being enforced, notwithstanding ample evidence for their application.
Congressman Neal Smith (D-Iowa) has held numerous hearings and investigations in recent years to alert the nation to these developments. He has exposed manipulations of cattle futures markets by large traders with inside information. He has focused attention on the role of the “Yellow Sheet” (a price reporting service in Chicago) in advancing formula trading in meat that removes buyers and sellers from the competitive marketplace.
But Smith’s disclosures rarely are reported in the large cities of the East and West. Hearings on the meat industry usually are treated as “farm-belt” stories by the media, except for exposes of dirty meat plants.
A way of life for many small businesses and workers in the livestock and red meat industry is disappearing. If consumers do not start listening to Neal Smith, their appetite for steaks and other beef products may become priced at caviar levels.