Meatpackers Feed on Fed Cattle

• DOI: http://doi.org/10.1177/0003603X221149365
• Published date: 01 March 2023
• Date: 01 March 2023
• Subject Matter: Articles

https://doi.org/10.1177/0003603X221149365

The Antitrust Bulletin

2023, Vol. 68(1) 88 –106

© The Author(s) 2023

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DOI: 10.1177/0003603X221149365

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Article

Meatpackers Feed on Fed Cattle

Brianna L. Alderman*

Abstract

There are numerous accusations of collusion in protein markets throughout the United States. The

cattle market is no exception. The four major meatpackers stand accused of acting in concert to lower

the quantity of cattle purchased in the cash market for fed cattle. The plaintiffs in these cases allege

that these meatpackers have purposefully depressed the price they pay to various cattle ranchers

and feedlot operators. This article explores the allegations brought forth in one of these complaints,

as well as the economic consequences resulting from the formation of a cartel in this market if a

collusive agreement truly exists.

Keywords

monopsony, antitrust, cartel, price fixing

I. Introduction

The meatpacking industry is no stranger to accusations of collusion and anticompetitive behavior.1

Several articles throughout the last 100 years have discussed the cases presented by U.S. antitrust agen-

cies and their leadership.2 These accusations were prevalent in the twentieth century, and it does not

appear that these accusations are disappearing any time soon.

In the past few years, various cattle ranchers and feedlot operators, that is, fed cattle suppliers, have

filed antitrust suits against the four major meatpackers: Cargill, JBS, National Beef, and Tyson.3 They

believe that these meatpackers have engaged in collusive monopsony, that is, the Big Four meatpackers

have agreed among themselves to depress fed cattle prices. These monopsonistic abuses, if true, affect

ranchers and beef consumers alike.

*McNair Scholar, Department of Economics, University of Florida, Gainesville, FL, USA

Corresponding Author:

Brianna L. Alderman, McNair Scholar, Department of Economics, University of Florida, Gainesville, FL 32611-7140, USA.

Email: brianna.alderman@ufl.edu

1149365ABXXXX10.1177/0003603X221149365The Antitrust BulletinAlderman

research-article2023

1. For example, see In re Beef Industry Antitrust Litigation, 600 F.2d 1148 (5th Cir. 1979).

2. For discussions of past investigations and litigation, see Robert M. Aduddell and Louis P. Cain, The Consent Decree in the

Meatpacking Industry, 1920-1956, 55 Bus. Hist. Rev. 359 (1981); G. O. Virtue, The Meat-Packing Investigation, 34 Q J

econ, 626 (1920); and Jon K. Lauck, Competition in the Grain Belt Meatpacking Sector after World War II, 57 Ann iowA

135 (1998).

3. Cargill refers to Cargill Incorporated and Cargill Meat Solutions Corporation. JBS refers to JBS S.A., JBS USA Food

Company, Swift Beef Company, and JBS Packerland, Inc. Tyson collectively represents Tyson Foods, Inc. and Tyson Fresh

Meats, Inc.

Alderman 89

Plaintiffs have presented evidence suggesting that the Big Four firms have continued to restrict their

slaughter volumes since 2015, while independent packers have steadily expanded their slaughter counts

during the same time frame.4 Their evidence also suggests that the price of cattle has fallen and remained

low since 2015. During the alleged cartel period, the Plaintiffs assert that the price per cwt of cattle fell

well below the expected price, even reaching as low as two-thirds of the expected price.5 During the

same period, the price of beef has increased in the output market, leading to increased profit margins

for meatpackers.6

Although it is known that the exercise of monopsony power reduces the price of an input, a common

misconception is that these lower prices are passed on to consumers.7 While the exercise of monopsony

power does lead to lower prices for inputs, it also leads to reduced purchases. With fewer inputs, the

monopsonist’s output necessarily falls. As a result, the price to consumers rises and they are worse off.

In the end, those with monopsony power benefit from its exercise, while input suppliers and down-

stream consumers are injured.8

Therefore, any impact on prices in the cattle market is likely to be of public concern. Legislation

intended to police the behavior of the Big Four meatpackers, as well as assist ranchers and feedlot

operators are currently being discussed by policymakers on both sides of the aisle, including Cory

Booker, Chuck Grassley, Deb Fischer, and Elizabeth Warren.9 Antitrust enforcement agencies are also

investigating the actions of the major meatpackers, hoping to discover whether the reduction in cattle

prices is the intentional result of some nefarious scheme or simply market forces at play.10

This article provides an economic analysis of the claims put forward by some of the cattle ranchers,

feedlot operators, and their representative parties in one of the current antitrust lawsuits. Although there

is much debate among lawyers, antitrust economists, and agricultural economists about the current

4. See 3rd Amended Class Action Complaint, In re Cattle Antitrust Litigation, Civil No. 19-cv-1222 (JRT/HB) at Figure 4.

I have relied on this complaint and the sources cited therein for this and any further information specific to the cattle

industry, as cited below. These facts must be proven, and not all of the facts presented by the Complaint have been inde-

pendently verified.

5. The Plaintiffs claimed that the price of cattle was expected to be $150 per cwt after 2015 for multiple years, but dropped to

as low as $98 per cwt during the period of alleged collusion. Id. at ¶7 and ¶232. It is unclear how the Plaintiffs calculated an

expected price of $150 per cwt. For ease of exposition, I have taken this number as given throughout this article, but have

not proven it to be an accurate estimate.

6. Id. at Figure 6. This article’s general focus will remain on the cattle market. For an in-depth examination of allegations of

collusion in the beef market, see Roger D. Blair, The Consumers’ Beef about Beef Prices, 68 AntitRust Bull (forthcom-

ing 2023).

7. For an example of such a misconception, see Debbie Feinstein and Albert Feng, Buyer Power: Is Monopsony the New

Monopoly, 33 AntitRust 12 (2019) at 13: “But suppose the monopsonist is able to receive lower prices, thereby lowering

its costs. In that situation, consumers could benefit.”

8. Even in a competitive downstream market, there is a welfare loss due to increased prices, but perhaps not in the long-run

depending on the long-run supply conditions. See Roger G. Noll, Buyer Power and Economic Policy, 72 AntitRust lAw J,

589 (2005) at 598–99.

9. To learn more about the Cattle Price Discovery and Transparency Act (S. 4030), see https://www.bloomberglaw.com/product

/blaw/bloomberglawnews/antitrust/XAVUEE98000000?bc=W1siU2VhcmNoICYgQnJvd3NlIiwiaHR0cHM6Ly93d

3cuYmxvb21iZXJnbGF3LmNvbS9wcm9kdWN0L2JsYXcvc2VhcmNoL3Jlc3VsdHMvYzI2M2RiM2M0NDRhNj

YxZGYzODU2MDA0YTI2ZGE4ZGEiXV0–11387c531157a3b561ee5608c279202b14f04441&bna_news_

filter=antitrust&criteria_id=c263db3c444a661df3856004a26da8da&search32=ngizb88UBrozBezXhurJwQ%3D%3DtQR

kUVnxQmlApelg9G9nK152Ey7qU7aAjCY7ayxoW8HjgXl5A3730KSCz0cCFzkB15vw59P4MSIbtUAz-tJXybyunJBoT-

dB3gbzWRhi0yJq4MbRW4rWLTKNC5UdIKTnw. Also, see https://www.reuters.com/markets/commodities/us-senators-

propose-ftc-investigate-beef-price-fixing-2022-05-19/, and https://www.bloomberglaw.com/bloomberglawnews/antitrust/

XBJKQH8K000000?bwid=00000181-8bb5-d491-afcd-cbb708f40001&cti=LSCH&emc=batnw_nl%3A5&et=NEWSLE

TTER&isAlert=false&item=read-text&qid=7312380&region=digest&source=newsletter&uc=1320027841&udvType=Al

ert&usertype=External.

10. See https://www.bloomberglaw.com/product/blaw/bloomberglawnews/true/X18JV9NC000000?bna_news_filter=true#jcite.