Every Friday, ranchers around South Dakota bring their cattle here
to this livestock auction
just outside the small town of St.Onge
to be sold by this man
Justin Tupper, the owner and auctioneer at St. Onge Livestock.
TUPPER: So, a lot of guys bringing in those cows.
They're bringing them in for the normal sale day.
St. Onge livestock is a family business.
TUPPER: Emily's helping clerk, Maggie's been helping outside, Cody'll be here in a little
bit and he'll work the night shift, and Brooke, my wife, is doing the books.
Justin’s sale barn facilitates millions of dollars in sales on a day like today.
TUPPER: I would guess somewhere between three and five million.
And it happens like this.
Cattle get dropped off in this pen.
Then they’re tagged and shuffled along this labyrinth-like system.
Until it’s their turn to be sold, and they enter the sale barn here.
This ring is actually a huge scale, so bidders know how much the cattle weigh.
As the bidders, who are other ranchers, watch from the stands
Justin or another auctioneer lead the auction with what’s called a chant.
(indistinct auction chant)
TUPPER: So that's what the auction is all about.
It's trying to get a fever pitch that get you to bid one or two more times more than
you anticipated because you're caught up in the moment.
Bidders are looking at the cows’ weight, breed, and age, and considering outside factors
like the weather and the futures market.
An almost imperceptible raise of the hand indicates a bid.
And it all ends with the highest bidder.
(indistinct auction chanting) Sold!
This process happens more than 100 times that day.
It is price discovery at work—creating a value for a commodity
in this case through, friendly competition.
TUPPER: When they come into the cafe , they'll sit
and visit with each other and be very cordial.
TUPPER: Sooner or later, they'll be split up out in the seats
and they'll be bidding against each other.
Small farmers and ranchers selling their product at auction has a long legacy in the US.
And the stakes are high for people selling cattle.
For some, the highest bid on this board is all the money they’ll make that year.
And lately those prices haven’t been enough for many of them to make it.
In the past 50 years, about 40% of cattle ranchers have gone out of business.
Healthy competition in a market means that there are numerous small producers and buyers
who compete equally for a commodity.
And as a result, not one player exerts outsized control over its price.
But in the American beef industry, something’s off-balance.
And it’s ruining the competition for everyone.
The buyers and sellers coming to these auctions represent the different stages of cattle ranching
all of which are affected by a lack of competition in the industry.
KAMMERER: I'm Matthew Kammerer from Rapid City, South Dakota.
Matthew is a cow-calf producer, a small-scale rancher who breeds cows
and raises calves on grass until a certain age.
KAMMERER: From getting up and all kinds of weather and times at night to check on
first calf heifers, to branding in the springtime, putting up hay for feed in the winter.
KAMMERER: And hopefully we bring one hell of a product here for the backgrounder.
A backgrounder is the next ranch cattle usually cycle through — another small or medium-scale
ranch where calves graze until they reach a certain weight.
VEURINK: I buy from the producer who raise that calf as a baby.
They'll feed them to an age of seven hundred pounds.
Then a backgrounder sells to a feedlot, like this one.
THOMPSON: I'm Ted Thompson from Lakewood, South Dakota.
We take cattle to feed yards and finish cattle.
Just like it sounds, finishing cattle is the last step of the cattle production cycle.
The feedlot owner then sells the finished cattle to the meatpacker, the company that
slaughters them and sells their meat to consumers.
Companies like Tyson or National Beef.
These three types of ranchers do all of their sales
through competitive bidding at livestock auctions like Justin’s.
But the sale between feedlot owners and the meatpackers looks a lot different.
And that has to do with this powerful player and over a century of history.
KELLOWAY: The creation of our antitrust laws really is tied to the meat industry.
Claire Kelloway, is a reporter and researcher on consolidation in agriculture.
KELLOWAY: I report on everywhere where corporate power shows up across the food supply chain.
KELLOWAY: Around the turn of the century, there were highly consolidated meatpackers.
They were called the Beef Trust.
Five companies controlled most of the market.
KELLOWAY: That's generally considered excessively concentrated.
And so you have risks of companies not competing for the lowest prices.
All different kinds of what we would consider anti-competitive or unfair behavior.
KELLOWAY: It prompted an outcry over the prices and conditions for farmers who are working
with these meat packers.
In 1921, President Warren Harding signed the Packers and Stockyards Act into law
to assure fair competition and to safeguard farmers and ranchers.
In the decades after this law was passed, the top four meatpacking companies in the
beef industry controlled about 25 percent of the market.
That’s under the 40 percent threshold
of what’s considered an overly concentrated market.
Under the Reagan administration, the US legal system transformed their approach to big business.
KELLOWAY: Around the nineteen eighties, a really conservative school of economic thought
took over a lot of policy, including antitrust.
KELLOWAY: And this allowed for a super permissive antitrust policy.
What followed was 40 years of mergers and acquisitions, especially in the meatpacking
industry, without the US government intervening.
Over that same time, while ranches went out of business
feedlots got a lot bigger to service their corporate customers.
KELLOWAY: This drive to become bigger and to cut costs, pushing more destructive forms
of livestock production.
KELLOWAY: So, the rise of more concentrated animal farms
which have huge externalized costs on the environment.
The result is a beef industry where the top four companies process 85 percent
of all the cattle produced in the US
well above the anti-competitive threshold.
Today, those companies are Tyson, JBS, Cargill and National Beef.
And if you eat beef, you more than likely buy it from them
when you shop at a conventional grocery store.
KELLOWAY: Concentration might not be something that most people see.
KELOWAY: There are some big name brands that we're familiar with.
KELLOWAY: But because these companies
have bought up a lot of other companies
it creates sort of an illusion of choice.
The fact that just 4 companies buy and process nearly all the beef in the US
creates a bottleneck here
between them and the feedlot owners
who buy from the backgrounders and cow-calf producers.
The public might only see the vulnerabilities of this structure when disaster strikes.
Like when a fire took out a Tyson plant in 2019.
When multiple meatpacking plants shut down in 2020 due to the covid pandemic.
Or, in 2021, when JBS underwent a cyber attack, forcing plant closures.
During these events, they paid ranchers less, and charged consumers more.
In a July 2021 Senate hearing, a Tyson representative
attributed this price spread to the law of supply and demand
because of closed plants, the supply of live cattle
outpaced processors’ ability to process those cattle.
But many people see the reliance on so few plants to process cattle as exactly the problem.
KELLOWAY: Cattle producers who are saying this is clear evidence of highly concentrated
meat packers using their position in the middle of the market to maximize their profits.
Before the industry got so concentrated again in the 80’s, meatpacker representatives
from different companies used to fill these stands like everyone else
contributing to price discovery and higher prices for ranchers.
But today they aren’t there.
KELLOWAY: Packers don't like bidding for cattle.
They want to be running their plants at full capacity and
they want to know how much cows are coming in.
That’s why about 72% of the sales in 2021 between feedlot owners and meatpackers is
through a contract instead of an auction
which removes them completely from the price discovery process.
The other 28% is still negotiated.
But with only four big meatpackers there are fewer bids, and they typically
don't take place at an auction.
Instead, buyers from the packing industry
often go straight to the feedlot owner like Ted.
THOMPSON: They'll typically go around to feed yards and see their show list.
TUPPER: Many times they don't see any buyers.
They may get a phone call from them and say...
THOMPSON: This is what we'll give today.
TUPPER: There's not a competitive nature that happens there.
In Colorado, for example, 2 years of USDA reports like this one, show negotiated cattle prices
as “confidential” because there are so few bidders that disclosing prices
might reveal who the bidder is, a violation of confidentiality laws.
More competition raises praises, something a cattle rancher, like Brad, knows from experience.
I gotta check this one.
He paused our interview to bid on a livestream open auction at a sale barn.
There's all the information, just like you see the sale barn, 14 head.
(indistinct auction chant)
I'm gonna bid right here.
(indistinct auction chant)
So did it go through?
Yep.
(indistinct auction chant)
See, he tells me.
(indistinct auction chant)
I'm gonna stay out.
(indistinct auction chant)
-So you didn't win that one? -Nope.
No, it was too high?
That's where I want to stop, 70 bucks.
So what did you do for the person that won that bid?
I think he is asking 160.
So between me and the people in the seats there.
That's 40 bucks that rancher put in his pocket just because he had competitive people per calf
and then that's a huge deal in a lot of times it's make or break.
TUPPER: Probably the most important bidder in the price discovery or the auction process
is the guy who didn't get it
because he bid against the guy who got them right up to the last bid
so he drove that price there.
Not having those competitive bids for the sale between meatpackers and feedlot owners
means Ted might get a lower price.
Which means they have less to bid on for the backgrounder, like Brad.
And the backgrounder has less to give to the cow-calf producer, like Matthew.
And that trickle-down effect is one reason why about 40% of cattle ranches
have disappeared since 1980
which means rural America has lost hundreds of thousands
of small family businesses.
I'm wondering whether you're worried about the survival of your business?
Yup.
It's a legacy out there.
And it's not gonna get any easier for these families.
It's losing the legacy of the family, the family ranch and stuff.
KAMMERER: Great grandpa came her in 1882.
KAMMERER: And I live in the same log house that he built.
TUPPER: It's infuriating.
Think of what some of that money... if it would have trickled down to the countryside
where we would be.
"The Senate agriculture committee looked at cattle industry markets
including the rise in beef prices."
In 2021, the US government started investigating whether lack of competition in cattle markets
requires legal or policy intervention.
And Justin Tupper was there to testify.
JOHN THUNE: I want to welcome to the committee, Mr. Justin Tupper.
TUPPER: Since 2015 corporate packers gross margin has ballooned from average of
100-200 a head to well over 1,000 a head
while cattle producers go out of business and
consumers pay double or even triple at the meat counter.
Solutions to promote competition include a proposed bill that would reduce the amount
of contract sales between feedlot owners and meatpackers from 72% to 50%.
Or making it easier for more meatpacking companies—more bidders, in other words—to enter the market.
To enforcing antitrust laws that were created for this very purpose.
The American rancher also serves as a symbol of independence.
But they've lost their independence from the few corporations that control the beef industry
and make it impossible to compete
Thanks for watching this first episode of our series with Future Perfect
a team at Vox that explores big problems
and the big ideas that can help tackle them.
We'll be diving into crucially important issues
like climate change, animal welfare, and global health.
We'll be exploring them through angles that are often neglected
and identifying the most effective solutions.
In this first season, we're looking at the human cost of meat.
The current scale of industrial meat production undoubtedly has an impact on animals
but it also deeply affects people.
People who consume meat, people who work in the meat industry
and people who live next to factory farms.
In future episodes, we'll be looking at
other ways that the meat industry has changed the way people work and live.