In Meat Wagon, we round up the latest outrages from the meat and livestock industries.
You'd be hard-pressed to find an industry more consolidated than beef-packing. Just four companies slaughter 83.5 percent of cows consumed in the United States. In standard antitrust theory, a market stops being competive when the four biggest players control 40 percent.
The beef industry's extraordinary concentration gives the Big Four massive leverage to dictate how beef is raised and sold. Their economies of scale give them power to squeeze their smaller competitors, who have to scramble to keep costs down to survive. Their suppliers, known as "calf-cow" operations, essentially have to accept the price the Big Four offers.
The recent downer-cow scandal in California, as well as the brewing health and ecological crises around feeding cows ethanol waste, are just two recent examples of the sorts of corners being cut by firms desperate to survive in a hyper-consolidated market.
Unbelievably, the beef market is about to get dramatically more consolidated.
JBS, the Brazil-based beef-packing powerhouse, has stormed into the U.S. market, emboldened by the U.S. dollar's steady drop against the Brazilian real. Last year, JBS bought Swift, the third-biggest U.S. beef packer. And in the last several days, it had signed deals to buy the fourth-biggest packer, National Beef Packing, as well as the beef-packing assets of hog giant Smithfield, the fifth-biggest beef packer.
If U.S. antitrust regulators wave the deals through -- and nothing in recent history suggests they won't -- JBS will control 33 percent of the market, Reuters reports. One company will slaughter one in three U.S. cows.
So what will that do for CR4, economists' jargon for the proportion of the market controlled by four players?
Let's look at the latest report (PDF) from Mary K. Hendrickson and William Heffernan, those indispensable documenters of concentration in U.S. ag markets. Here's what Hendrickson and Heffernan tell us:
| Beef Packer | Daily Slaughter Capacity |
| Tyson | 36,000 head |
| Cargill | 28,300 head |
| Swift & Co. | 16,759 head |
| National Beef Packing Co. | 13,000 head |
CR4 = 83.5 percent. CR4 is the concentration ratio (relative to 100 percent) of the top four firms in a specific food industry.
They add that Smithfield Foods is the "fifth largest beef packer after a series of acquisitions," but don't give a number for daily slaughter. The Wall Street Journal reports that JBS will boast a daily slaughter capacity of 42,500.
So that gives us a new Big Three that looks like this:
| Beef Packer | Daily Slaughter Capacity |
| JBS | 42,500 head |
| Tyson | 36,000 head |
| Cargill | 28,300 head |
To figure out CR4, we'd have to know what the old sixth-biggest packer was, because that one will now be No. 4. But we can figure out CR3.
Adding up the slaughter capacity on the Hendrickson/Heffernan chart, we find that the old Big Four could slaughter 94,000 cows every day. The new Big Three's daily slaughter sums to 106,500 cows. Going back to high-school algebra, and extrapolating from the above numbers, we find that the Big Three alone will control more than 90 percent of the market.
Let's hope regulators scotch this deal -- not for jingoistic reasons, but because this insane level of concentration is almost sure to harm consumers and ranchers alike.
Dairy farmers: squeezed to the last drop
Dairy farmers live in brutal times. Feed costs have skyrocketed, but the price they get for their milk from the big dairy processors hasn't risen nearly as steeply.
An article in Dairy Herd Management magazine tells the story. The journal tracks a metric known as the "milk-feed price ratio," which uses a complex formula to compare the price farmers get for milk to the amount the pay for feed and other inputs.
According to Dairy Herd Management, when the number "meets or exceeds 3.0," it's profitable for farmers to buy feed and produce milk. When it drops below 3.0, dairy farmers lose money. And that's the situation farmers now face. Reports the magazine:
The milk-feed price ratio continues to descend. According to the USDA's announcement of feed-price ratios on Feb. 29, the February ratio is 2.36. That is a 0.3-point loss from the January revised ratio of 2.66. It also is a mere 0.03 points higher than a year ago.
Since farmers are now losing money producing milk from confined corn-fed cows, might they switch to grass-based feeding?
Well, yes, there is talk in that direction. Over in Missouri, evidently, dairy farmers are sick of losing money cramming cows into confinements and stuffing them with corn. They're considering rolling the dice and putting the cows to pasture -- which, after all, is much healthier for the cows and the land, and produces more-nutritious milk.
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Comments
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Tasermons Partner Posted 9:29 am
05 Mar 2008
http://biz.yahoo.com/ap/080305/beef_deals.html?.v=1
Most analysts said the deals were positive moves for the beef product industry, which also is struggling to regain full access to the export markets after scares stemming from mad cow disease.
The proposed consolidation, which will need regulatory approval, comes at a time when ranchers are struggling to maintain herds as they pay more for grain and other feed and as grasslands suffer because of persistent drought and competition for land with urban developers.
Today, there are more processing facilities and more space available in the plants than there are cattle, said Jay Truitt, a vice president of the Denver-based National Cattlemen's Beef Association.
Ranchers are paying "more money for head than at any time since we've started tracking those numbers," he said.
Tyson Foods Inc., the world's largest meat producer, already plans to close one of its processing facilities in Kansas, saying it has an overcapacity to process cattle.
Herds have remained stable at around 34 million fed cattle, the animals which are the source of the bulk of consumer products. "The more relevant factor is we should be growing," Truitt said.
At the same time, meatpacking plants have been coping with higher commodity prices for grain in animal feed and a troubled export market that only recently has begun to reopen to U.S. beef after the mad cow scares.
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Angry African Posted 11:47 pm
05 Mar 2008
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caniscandida Posted 11:57 pm
05 Mar 2008
Chickens are our cousins! So are fish! So are other sentient animals! Let us learn to be kind.
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javaearth Posted 12:58 am
06 Mar 2008
Why do you think eating fresh vegetables, grains and beans is disgusting?
Colonialism, - Africa was not the only country under oppression, - There was also India. And as an Indian woman, I am against oppression, but unlike you I actually try not to cause cruelty nor oppression to any other creature on this earth!
Instead of eating more dead animals, how about you actually help your fellow Africans, and feed them the grains. Stop feeding the grains to the animals that you eat! Help the millions of Africans that are starving every year because the food that should be going to them is being feed to animals! ... And maybe just maybe you'll be the kind compassionate African, versus the "Angry African"!
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Tasermons Partner Posted 1:03 am
06 Mar 2008
Over here it's almost all factory and giant feed lot operations, there are very few independant small-scale community and family cattle farms like there are in Africa.
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Jason D Scorse Posted 1:33 am
06 Mar 2008
I teach environmental economics and blog at http://www.voicesofreason.info.
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Matt Posted 1:55 am
06 Mar 2008
I assume that what I was taught was incorrect and that all the people of Africa now speak with one voice... that's an amazing example of how people can work together! Good Job Guys!
If you continue to do what you've always done you'll continue to get what you've always got.
- Yogi Berra
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Tom Philpott Posted 3:55 am
06 Mar 2008
Victual Reality
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