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USDA Should Incentivize Smaller, Community-Based Meatpackers


Published: Friday, February 19, 2021

Forty years ago, two editors at Successful Farming magazine, Gene Johnston and Dean Houghton, won most major ag journalism awards with a story titled "Who will kill the hogs?"

The piece (not available online) tracked a new, potent shift just beginning to hit the 600,000 hog farmers in the U.S.: Local meatpackers were being squeezed for hogs and markets by other, aggressive packers that were buying competitors to shutter them and build new, huge, highly-efficient slaughtering plants.

The story was a clanging bell that a sector-rattling shakeout was underway and few had any idea of who would be left standing when the bloodletting was over.

We, of course, now know; what's left is a handful of massive packers and not enough hog farmers to fill a university basketball arena.

In truth, we knew this within 10 years of the magazine story. By the early 1990s, major stockyards like Omaha, Kansas City and Chicago were faltering as packers moved to buy hogs "direct" from growers rather than the more costly stockyard "commission houses."

That new strategy was made easier since 400,000 hog farmers had exited the business in just the previous decade.

In the mid-1990s, this column and other publications pointed to how the now-powerful packers had integrated hog production into their business model to lock-in ready supplies and consistent quality in their 24/7/365 search for efficiency and profit.

By the early 2000s, with the takeover of pork now complete, the packers began to buy each other. For example, in 2001, Tyson Foods, principally a poultry integrator, bought the big beef packer IBP for $3.2 billion.

Again, none of this occurred in the dark. Every step in the long process happened in plain view of government regulators who either blessed these unions outright or ordered minor conditions for the deals to be approved.

Then, in early 2010, the Obama administration announced the U.S. Department of Justice, along with U.S. Department of Agriculture leaders, would sponsor a series of "workshops ... to discuss competition and regulatory issues in the agriculture industry." The key target was meatpackers.

Farmers, ranchers, farm and commodity group officials, industry experts and consumer groups eagerly told bureaucrats how the "dynamics of competition in agriculture markets" affected their farms, businesses, food and communities.

The result was, well, not much because there was little anyone could do.

No antitrust laws, in fact, had been broken by the packers or the shrinking number of machinery companies, seed sellers, fertilizer suppliers, grain buyers and food retailers examined in the hearings. Their climb from being just a cog in the ag machine to becoming the ag machine was, they explained, simply the market at work.

(Until recently, anyway, when several meatpackers, Tyson included, agreed to settle civil lawsuits filed by meat buyers who alleged some packers engaged in market manipulation that drove up buyers' costs.)

Which brings us, again, to calls for the Biden administration to break up highly integrated and concentrated ag sectors like meatpacking.

How?

There is no definitive plan, but you can bet the packers will fight in the courts and Congress to prevent one chicken leg or a single pig's ear to be taken from them without legal cause.

And rightly so. We may dislike or even hate Big Meat, but slicing them up looks like a very, very long shot indeed.

A better investment of time and talent is for the federal and state governments to shower their favoritism—grants, low interest loans, waived meat inspection fees, zoning assistance, and the like—to foster new, smaller, community-based competitors into the meat game.

For this to work, however, will take time. Remember, it took the Big Boys decades to get where they are today, so it will take years before the field tilts anywhere near level again.

But the best way to start is to start: hearings should focus on the future, not the past.

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