Economic distress in rural America continues

Food prices have gone up, but income for small and medium farms is stagnant. The New York Times describes more family agriculture operations in dire financial straits. The NYT writes:

SHEPHERD, Montana — Judging from the prices at supermarkets and restaurants, this would appear to be a lucrative moment for cattle ranchers like Steve Charter.

America is consuming more beef than ever, while prices have climbed by one-fifth over the past year — a primary driver for the growing alarm over inflation.

But somewhere between American dinner plates and his 8,000-acre ranch on the high plains of Montana, Mr. Charter’s share of the $66 billion beef cattle industry has gone missing.

A third-generation cattle rancher, Mr. Charter, 69, is accustomed to working seven days a week, 365 days a year — in winter temperatures descending to minus 40, and in summer swelter reaching 110 degrees.

Mr. Charter has long imagined his six grandchildren continuing his way of life. But with no profits in five years, he is pondering the fate that has befallen more than half a million other American ranchers in recent decades: selling off his herd.

“We are contemplating getting out,” Mr. Charter said, his voice catching as he choked back tears. “We are not getting our share of the consumer dollars.”

The distress of American cattle ranchers represents the underside of the staggering winnings harvested by the conglomerates that dominate the meatpacking industry — Tyson Foods and Cargill, plus a pair of companies controlled by Brazilian corporate owners, National Beef Packing Company and JBS.

Since the 1980s, the four largest meatpackers have used a wave of mergers to increase their share of the market from 36 percent to 85 percent, according to the U.S. Department of Agriculture.

Their dominance has allowed them to extinguish competition and dictate prices, exploiting how federal authorities have weakened the enforcement of laws enacted a century ago to tame the excesses of the Robber Barons, say antitrust experts and advocates for the ranchers.  

In past decades, when beef prices rose, so would payments to cattle ranchers, who claimed over half of what consumers paid for meat. But that relationship began to break down in 2015. Last year, cattle ranchers received only 37 cents on every dollar spent on beef, according to federal data.

The NYT article goes on to point out that current high beef prices are most directly reflective of scarce stocks, which is part of the supply chain disruption that accompanies the pandemic. Coronavirus spread through slaughterhouses, killing scores of workers and sickening thousands. That stopped some beef production, which caused beef shortages.

But before the pandemic, there were decades of corporate takeovers that closed slaughterhouses. When the packers cut their capacity to process beef, supply was reduced, and consumer prices increased. But maybe counter intuitively, fewer slaughterhouses meant a limited demand for live cattle. That reduced prices paid to ranchers and helped shift economic advantage or power to the the big corporate players.

One expert commented: “Their goal is to control the market so that they can control the price. The pandemic exposed the consequences of the consolidation of the meat industry.”

As usual for American capitalism, the big corporations are now fighting against a push from the Biden administration to revive antitrust enforcement. The rationale this time for deregulation of business by not enforcing existing laws is that, according to the NYT, it is “misguided.” JBS, the largest meatpacker in the US refused to discuss the effect of consolidation. JBS just referred the NYT’s questions to the North American Meat Institute, an industry lobbying firm.[1] A NAMI spokesperson said “Concentration has nothing to do with price. The cattle and beef markets are dynamic.” Tyson claims that slaughterhouses were closed because they were losing money, commenting: “The packers are not masterminds. The packing industry was unprofitable for several years, so they closed plants.” 

Misguided. Dynamic markets. Unprofitable operations shut down. Think about that. On the one hand, concentration is said to have nothing ton do with prices. On the other hand, allegedly unprofitable operations were shut down, which reduce supply and drove up prices. Concentration has something major to do with prices.

Why is it that sooner or later the big guys almost always wind up winning and the little guys usually wind up losing? Power, wealth, deregulated markets and non-existent law enforcement, that’s why. The big guys have the power and wealth because they are deregulated and relevant laws not enforced.

Here making a point about politics and ideology is useful. Conservative politicians and other neoliberal elites claim that deregulation allows markets to run free and wild, which best serves the public interest and society generally. The conservative rank and file mostly believe that because they have been told that thousands of times a year for decades. But what the elites know that the rank that file does not know is that deregulation means (i) deregulation of businesses, and (ii) not enforcing relevant laws. It does not mean reducing limits on individual liberties. In fact, power flows to the businesses, who then use it to control and crush whatever and whoever they can reach if it serves their lust for profit, like family farms and ranches and the land they sit on.

As I've argued here many times and argue again, when Republicans and other conservatives deregulate business, power flows from government to the businesses and their owners, not to average people. Power flows from government to the businesses. Why were there regulations in the first place? To protect the public interest and society generally. Government was protecting people, or at least trying to until it got subverted by business interests. Businesses protect profit, not people.

The NYT article comments that ranchers complain that the game is rigged. Well duh! Of course it is rigged. That is what the businesses want and that is what their campaign contributions, propaganda and lobbying money buys in our pay-to-play political system. It buys deregulated markets running free and wild and ranchers going out of business so other huge agriculture companies can buy the land and push the small guys out.

Jeez, this isn’t rocket science. It almost at the level of common sense, if there was such a thing (but there isn’t).

Anyway, The NYT notes that Congress passed the Packers & Stockyards Act of 1921 to “safeguard farmers and ranchers” — among other market participants — from “unjustly discriminatory and monopolistic practices.” Enforcing that is what the four huge meat packers claim to see as “misguided.” By misguided, the meat packers really mean, but would never admit, they see a threat to profits if existing law were to actually be enforced.

Questions: 

1. Is most of the conservative rank and file mostly deceived about what deregulation means, at least when Republicans do it?

2. Is it true, as the meat packer lobbyists claim, that concentrated means of production and supply have no impact on prices? (If so, most economic theory appears to be just crap)

3. Who is more likely to better protect family cattle ranchers from behemoths, Republican politicians or Democratic politicians?

Footnote:

1. The NYT article points out that a lot of Montana cattle are processed in slaughterhouses run by JBS, the world’s largest meat processor. Two brothers, Wesley and Joesley Batista, control JBS. They are worth about $5.8 billion. They went to prison after pleading guilty to participating in a Brazilian bribery ring a few years ago, but are out of the slammer now. JBS spent $20 billion to buy control of one-fourth of the American beef slaughter capacity. JBS had $18 billion in revenue between July and September of 2021. That was a 32% increase compared with the same quarter in 2020.