Fast Food Nation - Eric Schlosser [77]
A century ago, American ranchers found themselves in a similar predicament. The leading sectors of the nation’s economy were controlled by corporate alliances known as “trusts.” There was a Sugar Trust, a Steel Trust, a Tobacco Trust — and a Beef Trust. It set the prices offered for cattle. Ranchers who spoke out against this monopoly power were often blackballed, unable to sell their cattle at any price. In 1917, at the height of the Beef Trust, the five largest meatpacking companies — Armour, Swift, Morris, Wilson, and Cudahy — controlled about 55 percent of the market. The early twentieth century had trusts, but it also had “trustbusters,” progressive government officials who believed that concentrated economic power posed a grave threat to American democracy. The Sherman Antitrust Act had been passed in 1890 after a congressional investigation of price fixing in the meatpacking industry, and for the next two decades the federal government tried to break up the Beef Trust, with little success. In 1917 President Woodrow Wilson ordered the Federal Trade Commission to investigate the industry. The FTC inquiry concluded that the five major meatpacking firms had secretly fixed prices for years, had colluded to divide up markets, and had shared livestock information to guarantee that ranchers received the lowest possible price for their cattle. Afraid that an antitrust trial might end with an unfavorable verdict, the five meatpacking companies signed a consent decree in 1920 that forced them to sell off their stockyards, retail meat stores, railway interests, and livestock journals. A year later Congress created the Packers and Stockyards Administration (P&SA), a federal agency with a broad authority to prevent price-fixing and monopolistic behavior in the beef industry.
For the next fifty years, ranchers sold their cattle in a relatively competitive marketplace. The price of cattle was set through open bidding at auctions. The large meatpackers competed with hundreds of small regional firms. In 1970 the top four meatpacking firms slaughtered only 21 percent of the nation’s cattle. A decade later, the Reagan administration allowed these firms to merge and combine without fear of antitrust enforcement. The Justice Department and the P&SA’s successor, the Grain Inspection, Packers and Stockyards Administration (GIPSA), stood aside as the large meatpackers gained control of one local cattle market after another. Today the top four meatpacking firms — ConAgra, IBP, Excel, and National Beef— slaughter about 84 percent of the nation’s cattle. Market concentration in the beef industry is now at the highest level since record-keeping began in the early twentieth century.
Today’s unprecedented degree of meatpacking concentration has helped depress the prices that independent ranchers get for their cattle. Over the last twenty years, the rancher’s share of every retail dollar spent on beef has fallen from 63 cents to 46 cents. The four major meatpacking companies now control about 20 percent of the live cattle in the United States through “captive supplies” — cattle that are either maintained in company-owned feedlots or purchased in advance through forward contracts. When cattle prices start to rise, the large meatpackers can flood the market with their own captive supplies, driving prices back down. They can also obtain cattle through confidential agreements with wealthy ranchers, never revealing the true price being paid. ConAgra and Excel operate their own gigantic feedlots, while IBP has private arrangements with some of America’s biggest ranchers and feeders, including the Bass brothers, Paul Engler, and J. R. Simplot. Independent ranchers and feedlots now have a hard time figuring out what their cattle are actually worth, let alone finding a buyer for them at the right price. On any given day in the nation’s regional cattle markets, as much