Breaking the Market Power Bottleneck in U.S. Beef: A Roadmap for Building an Independent Ranching and Processing Sector: A Joint OCM-AAI Initiative



The American Antitrust Institute (AAI) and Organization for Competitive Markets (OCM) announced a new joint initiative, Breaking the Market Power Bottleneck in U.S. Beef: A Roadmap for Building an Independent Ranching and Processing Sector, to promote competition in the U.S. beef supply chain. The OCM-AAI Beef Initiative brings together two longstanding, non-profit organizations with deep industry expertise and competition advocacy track records. The joint initiative will support the competition policy initiatives recently introduced by the Biden Administration’s Department of Agriculture (USDA) and to urge the U.S. Department of Justice (DOJ) and USDA to consider a full complement of policy tools needed to support competition in beef, for the benefit of consumers and producers.

AAI President Diana Moss noted “We are delighted to team up with OCM on this important initiative.” Massive consolidation at the processor and retail grocery level has eliminated meaningful competition in the beef supply chain in the U.S., the price of which is paid directly by ranchers and consumers. “The OCM-AAI Beef Initiative will develop tractable proposals to create meaningful structural change to support competition, especially from independent ranchers and beef processors,” Moss added.

Mike Eby, Executive Director of OCM stated “OCM is pleased to work with AAI in this initiative. Nothing is more important to independent farming than the existence of fair and competitive markets. The strategic expansion of beef processing is a must. OCM and AAI both understand there is no better time than the present.”


The Competition Problem in Beef

Every day, ranchers and consumers confront the fallout from decades of massive consolidation in the beef processing segment of the supply chain. Four large meat-packing companies control over 80% of the market. This domestic beef packing cartel has extracted billions of dollars of ill-gotten profits from ranchers and consumers. Moreover, a lack of competition limits ranchers options for selling their products and pushes down the prices they receive for them. At the other end of the supply chain, the cartel raises consumer prices for beef at the grocery store.

The “squeeze” on U.S. ranchers and consumers also comes from standards that allow products to be labeled “Made in the USA,” even if animals are imported from abroad and slaughtered and processed in the U.S. This makes it difficult for smaller, independent ranchers and processors in the U.S. to differentiate their products. The squeeze also prevents consumers from exercising their right to fair prices and quality; but also the right to purchase their beef from a variety of sources, including smaller, innovative U.S. ranchers and processors.

The beef dollar statistics tell a concerning story. Between 1980 and 2020, the retail sector’s share of the beef dollar has grown by about 65%, while the packer’s share increased even more—by over 70%. Over the same period, ranchers’ share of the beef dollar dropped precipitously by about 40%. And since mid-2015, prices for cattle have declined, while the price of retail beef has increased, creating a widening gap. The decline in independent family animal agriculture, driven in large part by consolidation in food and agriculture, has led to the deterioration of the rural U.S. economy.


Signs of Progress

The need to address the high concentration and lack of market competition that has fostered a dire situation in the U.S. beef sector is increasingly recognized at the uppermost political and economic levels. Actionable proposals are badly needed to give smaller ranchers and processors a level playing field to access markets and distribute their products, and ensure that consumers pay fair prices and receive high quality beef products. Strong public and private antitrust enforcement to break the power of the packer cartel is essential. But complementary policy initiatives are also needed to bootstrap enforcement by creating a roadmap for improving market access, increasing geographic diversity, and crafting appropriate “rules of the road” that will foster the growth of an independent ranching and processing sector.

There are currently a number of bipartisan legislative and administrative initiatives designed to remedy the damage from the accretion and exercise of market power in the beef supply chain. Among these initiatives are: a rulemaking that would reestablish and reinvigorate the Packers and Stockyards Act (PSA) of 1921; a legislative proposal to provide for much stronger enforcement of the PSA; an Executive Order that includes incentives to expand independent meat processing; proposed measures to increase contracting and market pricing transparency; and congressional pressure for a U.S. Department of Justice (DOJ) investigation of anticompetitive conduct by the major meat packers.


Harnessing the Power of Advocacy

The breadth and depth of advocacy in food and agriculture is significant. Advocacy groups focus on a host of issues, including antitrust enforcement and competition policy, the role of farmers and rural communities, fairness to consumers, independent food systems, and food security. The Organization for Competitive Markets (OCM) and American Antitrust Institute (AAI) are two major advocacy organizations with a long track record of collaboration in framing and driving the implementation of actionable proposals to promote competition in food and agriculture.

Today, OCM and AAI again join forces to introduce the OCM-AAI Beef Initiative. The purpose of the OCM-AAI Beef Initiative is to encourage an integrated policy approach to support the growth of a competitive and independent ranching and processing sector. This includes vigorous antitrust enforcement, pro-competitive regulation, and constructive legislation.

Policies designed to promote the growth and stability of such a sector include, but are not limited to:

  • Antitrust enforcement against the 4-firm oligopoly that dominates the processing segment of the beef supply chain and revisiting merger enforcement policy in retail grocery
  • Improving market access through pricing reforms and increased transparency
  • Scrutinizing the anticompetitive incentives associated with concentrated packer integration into cattle supply and conduct designed to exclude smaller ranchers and processors
  • Product labeling that promotes independent suppliers’ ability to differentiate the quality/origin of their beef and consumers’ right to choose
  • Food inspection processes that differentiate large scale v. smaller scale processing plants based on scale and efficiency
  • Supplier diversity as a goal of government food procurement policy
  • Consumer education on the importance of diversity and resiliency in the beef supply chain

The foregoing goals, and policies needed to achieve them, that are envisioned in the joint OCM-AAI Beef Initiative are fundamentally more ambitious than simply improving access to existing markets through subsidies and lowering the transactions costs experienced by smaller producers. Rather, the OCM-AAI Beef Initiative is designed to inject needed competition to support the diversification of the highly bottlenecked beef supply chain we see in the U.S. today. It looks to promote competition from the aggregate impact of smaller ranchers and processors; spur the growth of new regional markets for differentiated products—including high quality domestic (or made in the USA) beef; and support the development of a more resilient supply chain that incorporates multiple channels to the consumer. Needless to say, such competition would promote the livability of the rural U.S. and durability of the family farm and ranch.

OCM and AAI strongly endorse keeping these goals at the top of the Biden Administration’s antitrust enforcement and USDA policy agenda.


The OCM-AAI Beef Initiative:

The OCM-AAI Beef Initiative will form a task force to complete three major tasks over the period October 2021 to January 2022:

  • Assess the current state of the U.S. independent ranching and processing sector, by region and type of processing operation, including integrated and non-integrated processors. Case studies and interviews with key businesses and leaders in the independent sector will be the basis for this review.
  • Identify current major rules, regulations, and policies that—given consolidation in the markets for beef processing and retail grocery—should be revised to foster market access by independent processors, address anticompetitive discrimination, and remove barriers to entry to wider distribution by those market players.
  • Propose policy recommendations based on findings from the foregoing assessments. Recommendations will be geared toward a broad audience of legislators, regulators, and enforcers and identify areas where better coordination between different policy tools are important.