A historical perspective on packer concentration

Dr. Frannie Miller (NMSU) recently posted an item on Facebook that generated discussion on several issues, one of which was packer concentration. A participant suggested

Anti-trust legislation in some form to move 80% ownership of beef to multiple smaller percentages with a percentage cap that will also include price discovery on live animals. Secondly we need to energize small america and find a way small butchers/processors can serve as USDA graders and inspectors to allow for a delivery system and a link to grocers, restaurants and communities.

To which I responded

“Secondly we need to energize small america and find a way small butchers/processors can serve as USDA graders and inspectors to allow for a delivery system and a link to grocers, restaurants and communities”

I believe that is our best shot at reform, to allow state or other types of inspection for local processors. It is the quickest and most politically viable option, and it will do exactly what the big 4 don’t want: increase competition.

Let’s remember the big packers, the Big Six as they were known then, not only supported but lobbied heavily for the Meat Inspection Act. They wanted this for two reasons: to gain access to the European market where U.S. beef had been banned, and to limit competition within their own industry. And there was competition. A government study of the meat industry in 1905 found the Big Six killed and sold from 45 to 50 percent of the nation’s beef. The number of slaughtering and meat packing outfits was increasing sharply, from 1,080 in 1889 to 1,641 in 1909. This increase of 52 percent in the number of firms was not appreciated by the big boys. Plus, by 1904, 73 percent of the entire U.S. kill was inspected. “It was the smaller packer that the government inspections system failed to reach, and the major packers resented this competitive disadvantage.” Thus the push for the 1906 bill and the huge increase in appropriations that accompanied it. Even Sinclair Lewis, the author of The Jungle, which is often credited for engaging the public in this issue, afterward wrote “The Federal Inspection of meat was, historically, established at the packers’ request; … it is maintained and paid for by the people of the United States for the benefit of the packers.”

Anyway, the “trust busting” followed by years of regulations, anti-trust laws and so on haven’t worked. Concentration is worse now than when this all started. I say give them a dose of what they most fear – competition. Revise the regulatory regime to give the smaller, decentralized operations a fair chance.

I wrote that hoping to dispel two myths: First, that the regulatory regime was "forced" upon the packers, and second that one of the problems was a lack of competition.