It’s no secret that America’s livestock markets are highly consolidated. In 2022, the four largest beef processors, Cargill, Tyson Foods, JBS and Marfig controlled 85% of feedlot cattle in the U.S. and 60% of birds in the poultry industry were bought by the top four processors. Meanwhile, the rate of attrition among farmers remains high, with few new producers entering the market every year. In a system where very few buyers control the majority of sales, farmers have little control over where they sell their products and for how much, while consumers pay unfairly high prices for these products. Meatpackers and poultry processors use their unfair buying power not only to manipulate prices, but also to benefit certain producers and drive their competition out of business.
The “tournament system” in poultry production is a prime example of the unfair power that corporations wield over farmers. Poultry growers, who are contracted to sell within a highly vertically integrated system (meaning that one company owns most stages of production normally owned by separate companies), get paid for the birds they produce based on their performance in an opaque ranking system where they compete against other producers for their pay. Within these systems, farmers must implement expensive, contract-mandated upgrades to their poultry houses with no way of knowing what they’ll be paid and whether their pay will actually cover the cost of the upgrades. These farmers can have their contracts terminated for unknown and unfair reasons, leaving them with huge amounts of debt and no alternative buyer. Similar unfair buying practices occur throughout the livestock industry.
Without the ability to receive a fair price for their livestock, many small producers have been forced to consolidate, ramp up their production, or go out of business, but nonetheless are often not always able to break even with production costs. This resulting concentration has been bad for everyone except the owners and shareholders of large meatpacking companies. While the average cost of beef rose 7% for consumers in 2020, Tyson and Cargill saw revenue increases of $43.2 and $3 billion, respectively.
In theory, legislation exists to address these unfair market practices: The Packers and Stockyards Act (PSA). Passed in 1921, the PSA was created to regulate meatpackers, livestock and poultry dealers, swine contractors and other middlemen in the livestock industry. The PSA addresses industry-wide concentration and anticompetitive practices in the livestock sector, but also contains several provisions that protect individual farmers and ranchers from abuse and unfair practices.
The PSA is meant to level the playing field for producers of all sizes and reign in the power of corporate giants, but over the past one hundred years, the Act has been gutted and its enforcement severely lacking. The Packers and Stockyards Division (PSD) is responsible for enforcing the PSA, but its efficacy has varied over time, often wavering and lacking teeth. After decades of farmers’ calls to address unfair contracts and practices, the 2008 Farm Bill gave PSD more authority to issue stronger protections for farmers and ranchers. In 2015, Congress allowed the USDA to move forward with groundbreaking rules that would protect farmers in the livestock industry, but the Trump Administration delayed the enactment of these rules and gutted PSD, greatly hindering its ability to enforce the PSA. The Biden administration pledged to strengthen the PSA and its enforcement, a process which finally began in 2021 and was a long-awaited and much needed step in the right direction. But now it is threatened again.
The recent turn towards enforcement has not gone unnoticed by the meatpacking industry. In the latest sign of just how powerful and influential these corporations have become, corporate packers have successfully lobbied the House Agriculture Appropriations Subcommittee to include a “rider,” or a policy tacked onto a larger, must-pass bill, derailing the recent efforts at strengthening the PSA. In this case, the rider was part of the House’s agricultural appropriations bill in June.
Devastatingly, the language of this rider prevents the USDA from effectively enacting the rulemaking process as it pertains to the PSA. As a reminder, “rulemaking” is the step following the passage of a bill, where a government agency decides how exactly legislation will be carried out and enforced. Effectively, this rider would render the PSD toothless once more.
The rules that the rider blocks have been long-sought by livestock producers and would provide protection to producers by requiring transparency in poultry contracts, prohibiting deceptive contract practices, and increasing protections against discrimination and retaliation by meatpacking corporations against the farmers they contract with who report unfair practices.
The appropriations bill proposed by the House also strips funding from PSD, which would hinder its ability to adequately staff and enforce the PSA. Additionally, the rider prevents the USDA from pursuing the creation of more rules before the House Agriculture Committee (which obviously opposes the enforcement of the PSA) is allowed to know what the new rules will be. This back-door approach by corporate lobbyists blocks the extent to which the PSA can be effective and upends years of hard-fought progress to reign in the monopoly power of corporate meatpackers.
In response to this rider, Farm Aid and 101 other organizations sent a letter to Congress condemning the efforts by the House Agriculture Committee to hinder the PSA. Farm Aid and its partners will continue to monitor how Congress addresses this issue moving forward.
In the meantime, the 2023 Farm Bill provides a critical opportunity to strengthen the PSA. Some potential policy solutions to address this issue include:
- Placing prohibitions on tournament systems or guaranteeing a base rate of pay for producers;
- Restoring country-of-origin labeling to give consumers a fair choice and increase transparency in the meat market;
- Making retaliation against producers who speak out about their contracts illegal;
- Clearly identifying unfair, discriminatory, or deceptive practices;
- Reinforcing that the PSA does not require producers to prove “competitive injury” when they bring a claim of undue or unreasonable preference, or provide evidence that the act harms competition in the industry overall.
In addition, many of Farm Aid’s advocacy partners have helped to put forward bills for the upcoming Farm Bill that target the issue of PSA enforcement and consolidation in the meatpacking industry, which Farm Aid will advocate for the inclusion of in the coming months.
It’s time that we address the corporate consolidation of our livestock industry and the harms it causes farmers and consumers.