In 1919 the US Federal Trade Commission (FTC) reported to President Woodrow Wilson on a months-long investigation that produced seven volumes of evidence related to anti-competitive practices in the meat packing industry, at that time dominated by the "Big Five" companies Armour, Swift, Morris, Wilson and Cudahy Packing. That investigation revealed "an intricate fabric of monopolies, controls, trusts, combinations, conspiracies or restraints [of trade]" underpinning the "huge profits" of the Big Five and, two years later, resulted in Congress passing the Packers and Stockyards Act (PSA).
While the Act gave the US Department of Agriculture (USDA) the authority to regulate the meatpacking industry in order to "protect farmers, ranchers, and consumers," the major change from 1919 until now has been an increase in consolidation, with the "Big Five" mega-meatpacking companies currently reduced to just four - JBS (a Brazilian company that in 2007 purchased Swift, then the third largest US meat packer), Tyson, Cargill and National Beef - that today control more than 80 percent of the beef and pork produced in the United States and beyond.
I haven't eaten meat for more than two decades, but I'm smart enough to be terrified by that fact.
Last Friday's joint Department of Agriculture/Department of Justice workshop in Ft. Collins, Colorado, on anti-competitive practices in the meat industry became, by default, a public hearing on proposed rules, currently open for public comment, that aim to address some of the worst abuses. The rules, which were proposed by the USDA as required by the 2008 federal Farm Bill, would make it easier for farmers and ranchers to bring lawsuits under the Packers and Stockyards Act by removing the requirement that they prove industry-wide conspiracy on the part of meat packers. The proposed rules would also require more transparency in meat purchasing contracts.
Not surprisingly, support and opposition for the rules split neatly among the vested interests of the estimated 2,000 attendees at the Ft. Collins workshop, with industry representatives opposed to increased regulation and small ranchers and farmers in favor of anything that might loosen the stranglehold under which they're raising their hogs, heifers and steers.
Federal farm census data show that in the past 30 years the number of US hog farms dropped by a stunning 89 percent, from 660,000 in 1980 to just 71,000 today, while the number of cattle ranches decreased by 40 percent, from 1.6 million to just 950,000. As the number of ranches and farms has dropped, the prices ranchers and farmers receive for the livestock they raise has fallen off a cliff, with the portion of the supermarket price they receive cut roughly in half. For example, in 1980 a hog farmer received 50 percent of the price paid for pork at the market; by 2009 that had shrunk to less than 25 percent, with the balance going to the meatpackers.
The Ranchers-Cattlemen Action Legal Fund (R-CALF) a nonprofit that represents ranchers nationwide, provided detailed testimony and analysis to the Department of Justice and USDA. According to their comments, which are on file at the hearing website, 30,000 cattle feedlots owned by farmers and ranchers have disappeared since 1996. As R-CALF points out, those independent feedlot owners contributed greatly to the competitiveness of the cattle market and their "drastic decline means that today there are 30,000 fewer bidders for feeder cattle," in the United States. At the same time, "the number of cattle marketed by the largest of feedlots, those with capacities of at least 50,000 head, has increased by more than 1.3 million head."
This intense concentration has been carried out in strictly illegal fashion. As R-CALF CEO Bill Bullard told Department of Justice officials earlier this month, the long-ignored Packers and Stockyards Act clearly prohibits beef packers from owning cattle at the last gathering point of slaughter-ready cattle, which in the 1920s, when the Act was passed by Congress, were stockyards, but which today are feedlots. Simply enforcing the PSA by, among other things, forcing meat packers to strictly divest their ownership in feedlots, would be a significant step in dismantling the current price-fixing scheme under which the industry now operates.
Congress should also finally act on "captive supply" legislation that has been introduced and ignored for more than a decade. Such a law would prohibit meatpackers from offering contracts, currently all too common, to purchase cattle and hogs at no set price and at no set time, leaving ranchers and farmers raising animals with no control over or knowledge of what they will ultimately be paid for their products. A law to reform captive supply arrangements would require that contracts to purchase livestock for slaughter include set prices and firm delivery dates, and that they be publicly offered.
Antitrust laws such as the Packers and Stockyards Act are supposed to ensure a level playing field among competing businesses, in the belief that doing so protects both producers and consumers. Whether or not one agrees with this theory and regardless of how one perceives American-style capitalism, anti-trust, anti-monopoly regulation has long been considered an essential cornerstone of a free market economy - or a counterweight, depending upon your point of view. In either case, USDA Secretary Tom Vilsack made it clear at Friday's hearing in Ft. Collins that he believes the cornerstone has crumbled.
"I can't tell you today that I know what the solution is, but I know we can't continue this trend because if we do, we will end up with a handful of farmers, a handful of packers, a handful of processors, and a handful of grocery stores," Vilsack said.
Attorney General Eric Holder's prepared remarks were, unfortunately, rather tepid, although he was careful to point out that the hearings on agriculture, of which last week's was the fourth out of five planned for this year, are "a cabinet level priority."
President Wilson's 1919 FTC commission report was anything but tepid, finding, among other things, that the power of the Big Five meatpackers was used to illegally manipulate markets, restrict supplies of food, control the price of food and defraud farmers and consumers.
Neither did the FTC investigators limit their concerns to the effects on American consumers of meat. Chief among the alarms they raised nearly a century ago were that all kinds of foodstuffs and other products were coming to be controlled by the Big Five and, even more paramount, that these same players were increasingly operating abroad, to the detriment of other nations and of America's reputation in the world.
Outlining how the Big Five also owned or controlled "more than half of the export meat production of Argentina, Brazil and Uruguay" and had "large investments in many other countries, including Australia," the 1919 investigators warned: "The small, dominant group of American meat packers [is] now international in their activities, while retaining American identity. Blame which now attaches to them for their practices abroad as well as at home inevitably will attach to our country if the practices continue."
The members of President Wilson's FTC 1919 investigation believed that, "If the fundamental and underlying evil are rooted out the whole structure of conspiracy, control, monopoly, and restraint [of trade] must fall." It's hard to imagine a federal bureaucrat today using such passionate and direct language to describe any kind of corporate avarice, but a frank assessment and a passionate enforcement of the law are certainly what's needed.
With all that passion and frank talk, however, the president, the FTC and Congress ultimately failed to carry out meaningful reform, leaving us, as Food and Water Watch recently put it, with the beef packing industry "more powerful and consolidated now than it was a century ago." And, now as then, Big Money is the biggest barrier to fixing the problem.
After noting the many products and industries over which the meatpackers were exhibiting increasing control, including "eggs, cheese, vegetables, oil and nearly every kind of foodstuff," the 1919 FTC investigation noted that "three of the most powerful banking groups in the country [Chase National Bank, the Morgan-controlled Guaranty Trust Company and First National Bank ], . . . among the most active agents in forwarding and bringing about the concentration of control of money and credit, [are] now participating in the rapidly maturing food monopoly."
On August 6, 1919, the US Department of Justice announced there would be a series of lawsuits filed in response to the FTC's investigative report on anti-trust violations by the Big Five meat packers. The next day, The New York Times reported, "agents of the packers have been in Washington for several days." There they have remained ever since, lining the pockets of lobbyists and the coffers of candidates. So today, as ever, the question is not whether the Administration has the ability or authority to bust up the meat monopoly, but whether it has the guts, political will and independence to do the job.
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