Cattle markets have been upended, and big meat producers are making 20 times normal margins as beef prices soar

cows beef cattle

Soaring beef prices are making big meatpackers fat and happy while smaller players are left cleaning up the scraps, according to a New York Times story published this week.

As restaurants have reopened and with America’s grilling season underway, demand has upended cattle markets. Futures contracts on ready-for-slaughter cattle have shot up 6.6% year-to-date and 27.7% in the last year. Wholesale beef prices are up 40% since March.

Meanwhile, meat-eaters are already paying 5% more for ground beef and 9% for steaks year-on-year, according to NielsenIQ data cited by the Times.

Elevated demand is bringing on new supply. Second-quarter beef production and beef-cow slaughter rates are up year-on-year, 1.6% and 10% respectively, according to a RaboResearch report. That has partially been driven by drought conditions on the west coast, which have encouraged farmers to cull cows early.

Sizzling demand isn’t the only factor at play, though. Grocers, smaller ranchers, and some members of Congress are alleging that the four biggest meatpacking companies – three of which are US-based – have colluded to tamp down the beef supply, keeping prices artificially high.

Fat margins are breeding suspicion. Cargill, a meat processor and America’s largest private company, is making as much as 20 times normal profit margins per cattle head, according to RaboResearch. Even compared to past periods of pricey beef, Cargill’s margins are still elevated by a factor of six.

One Montana-based small-time rancher told the Times he hasn’t turned a profit in four years – and he blames the big meatpackers. He, like other critics, believes beef supply is being manipulated, likely as a result of non-transparent practices and consolidation in the meat-processing industry.

Antitrust pressure is growing, including from a DOJ probe of the meatpackers’ potential anticompetitive practices. The “big four” processors – which collectively control 80% of the industry – were subpoenaed in the investigation last year, and this May, a bipartisan group of senators encouraged the DOJ to redouble its efforts.

The big four have shown some signs of investing in supply expansion. US-based National Beef is expanding an Iowa-based plant and Brazil’s JBS is investing hundreds of millions in higher wages and more robust facilities, per the Times report.

“We believe our investments in increasing capacity and offering industry-leading wages to attract workers will lead to more opportunities for producers and benefits to consumers,” a spokesman for JBS told the Times.

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US consumers face having to pay a lot more for beef as restaurants reopen and exporting increases

Livestock at a cattle market in Buenos Aires Argentina
Livestock at a cattle market.

  • Beef prices in the US spiked 5% between March and April, Reuters reported.
  • “The prices are astronomical,” a Louisiana real estate marketer told Reuters.
  • Members of Congress from South Dakota are calling for an investigation into the meatpacking industry.
  • See more stories on Insider’s business page.

The average price of a fresh cut of beef in the US reportedly spiked 5% between April and March.

In the last year, US prices were up 10%, Reuters reported, citing research from data firm NielsenIQ.

“The prices are astronomical,” a Louisiana real estate marketer told Reuters.

As the world tiptoed out of the pandemic, Americans were heading back to restaurants. That has increased demand, but it was just one of several factors putting upward pressure on beef prices, Reuters reported.

Beef prices reportedly were rising around the world, spurred in part by growing demand in China. US exports of beef were expected to rise 6 percent this year, fueled by increased consumption in Asia, according to data from the Department of Agriculture.

In the US, corn, and soybeans – common cattle feed – were at their highest prices in almost a decade, Reuters reported.

Meatpackers were also having difficulty finding and retaining employees.

“We have a high supply of cattle at one end of this equation and a high demand for US beef at the other, but the middle is being absolutely choked by the lack of processing capacity,” Ethan Lane, vice president of government affairs at the National Cattlemen’s Beef Association, said in a statement earlier this month.

Sen. John Thune and Rep. Dusty Johnson, both of South Dakota, have been calling for Washington to investigate what they say are anti-competitive practices and manipulation in the cattle market. They said meatpackers have been buying low from ranchers, then increasing prices for consumers.

Lane said, “Cattle producers deserve to know whether or not the price disparity that has plagued our market is the result of anti-competitive or other inappropriate practices in the packing sector.”

Thune and Johnson sent a letter to Attorney General Merrick Garland on May 17, seeking action from the Justice Department. Thune sent another letter to the Senate Judiciary Committee last week.

On Wednesday, Thune assigned some blame for rising prices to President Joe Biden’s administration, saying the current unemployment benefits are keeping potential meatpacking workers from seeking employment.

“And even now, with our country well on its way to full reopening, meatpackers are still not back to full capacity – at least in part, it seems, because the enhanced unemployment benefits the Biden administration is providing are not encouraging workers to come back to work,” Thune said.

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