Rural Reflections: Consumer responsible for chickenizing the meat industry

Farm Forum

As cattle prices are at all-time highs, those in the livestock industry are concentrating on putting pounds on animals. Lush hay crops mixed with low corn prices are a great combination for cattle in this state.

In agriculture, producers have learned to be prepped for those unexpected events that may impact the bottom line.

Tyson Foods Inc.’s pending $7.7 billion takeover of Hillshire Brands Co. has some concerned about future consequences. Many are worried that the proposed merger will hurt consumers, farmers and ranchers alike.

According to a recent report, South Dakota’s livestock industry provides more than 29,000 jobs and contributes $7.3 billion to the state’s economy.

Earlier this year, a book called “The Meat Racket: The Secret Takeover of America’s Food Business” by Christopher Leonard was sent to me for review. The 319-page publication outlines many behind-the-scenes wheelings and dealings that go on in the nation’s meat business.

As I read the book, I was skeptical. The author pulled me in with detailed information. He described the rise of the Tyson company, creating a vertically integrated system where the company controls each part of the process, from the eggs, to the chickens to the chicken McNuggets.

Leonard describes the battle for survival within the beef industry, dividing it into two groups. The producers are the ranchers and big feedlot owners. The meatpackers are those who kill the animals. He says the fight comes down to control, a tug-of-war between the two groups, with packers clearly winning.

Leonard, who was at one time an agribusiness reporter for the Associated Press, wrote “Tyson has finally managed to tame the cattle herd. And by doing so, it has largely completed its project of chickenizing the meat industry. … The tide of money is inexorably moving toward the contract operations.”

Producers in states such as South Dakota recognize the need to add value to their products, and they value their independence. Efforts to set up companies such as Northern Beef Packers in Aberdeen began in 2006. Some say that despite new owners, the effort will continue to languish because of the shadow cast by the huge national processing companies.

Conditions have led to fewer beef cattle. National Farmers Union (NFU) President Roger Johnson provided numbers that show that rural America has lost 34 percent of beef operations and 91 percent of hog farms since 1980 – a total loss of 1.1 million livestock farms. There are also fewer meatpackers and processors. Johnson said the top four beef packers have control over 81 percent of cattle slaughter in the U.S., and the top four swine processors control 65 percent of hog sales.

A coalition of 82 farm, consumer and rural-community groups is urging the U.S. Justice Department to extend its review of the merger. They say the scale and scope of the proposed marriage and complexity of the merging the companies’ operations causes great concern. The deal would put Hillshire’s Jimmy Dean sausages, Ball Park hot dogs and other meat products under the roof of Tyson, the largest U.S. meat processor by sales.

As Tyson grows, it is shuttering smaller facilities. I noticed a story last month that Tyson is closing three U.S. plants, employing a total 950 workers. The plants are in Cherokee, Iowa; Buffalo, N.Y.; and Santa Teresa, N.M. The three plants have been part of Tyson since 2001, when it acquired IBP Inc. of Dakota Dunes, S.D.

Johnson said that multinational companies proposing mergers say that consumers will benefit from better prices. “But we’ve seen how well that concept works in the real world, as anyone who has flown lately, or purchased prescription medication, or felt the sting of ‘Too Big to Fail’ banking, or dealt with a cable company can attest.”

“The scale and scope of this merger will substantially reduce competition in the meat sector, which is already very concentrated,” he explained.

Leonard, in his book, noted that the consumer has been the unwitting catalyst behind the changes:

“While Tyson has been the architect of the system, the driving force behind it has been the American consumer. Americans have decided that meat must be cheap and plentiful. It must be consistent in its attributes and predictable in its taste. It takes factory farms to raise meat like that.”

At the end of the chapter called “Pulling the Noose,” Leonard writes, “There doesn’t seem to be any force powerful enough to stop this transformation.”

The details in Leonard’s book gave me a lot to chew on.