Sustainable Beef, a new beef processing plant in Nebraska, has taken the brave and commendable step to create a market opportunity for themselves, and hopefully open the door for more competition in the highly-consolidated meatpacking industry. However, we’re wary of recent news that Walmart has bought into the company, with their investment enabling construction to begin this month. Walmart, like any monopolistic corporation, is primarily concerned with amassing profit and power at the expense of everyone else, and this investment provides them with another opportunity to tighten their grip on the food supply chain.
Sustainable Beef was founded by a coalition of independent cattle feeders and ranchers who were rightfully concerned about market access through the packer-controlled industry, which is dominated by the “Big Four:” Cargill, JBS, Marfrig, and Tyson. The Big Four collectively process about 85% of fed cattle nationally. We’ve called out the Big Four for manipulating the market and price-gouging consumers, all while reaping record profits during the pandemic and other disruptions like the Holcomb Plant fire.
Like the rest of us, Walmart must not have liked being at the mercy of these meatpacking giants. Their solution? Acquire more control along the food supply chain. Vertical integration, where a company controls multiple stages along the supply chain that would normally be operated by separate companies, keeps their costs low and profits high. However, this comes at a cost to someone else along the supply chain, whether it’s the farmer, the consumer, or both.
Corporations claim these lower input costs translate into lower prices for consumers, which is not always the case. Meanwhile, they’ve reduced the marketplace competition necessary for farmers and ranchers to earn a fair price. Tyson Foods is a prime example of how vertical integration creates a system that’s bad for farmers and consumers, as they maintain control over the entire process from top to bottom.
“Cheap” Food at the Farmers’ Expense
Even in cases where vertical integration does keep costs low for consumers, that money comes out of the pocket of someone else: the farmer. Such is the case with Costco’s poultry processing system in Nebraska, where they control the entire production system from cradle to grave. They claim this keeps their rotisserie chickens priced at $4.99. But who is underwriting this cheap food?
Like other big poultry integrators, Costco requires farmers to foot the bill for costly investments into their facilities. If Costco decides to cut production, there aren’t other chicken processors around for farmers to contract with. Independent farmers were also the victims when Walmart launched its own dairy processing. Walmart’s former private-label dairy supplier, Dean Foods, went bankrupt after first terminating contracts with hundreds of dairy farmers.
How the Deal Shakes out
Walmart’s investment in Sustainable Beef secures funding and gets the company off the ground. It also anchors Walmart as a customer, and Sustainable Beef may not have had too many other choices in the highly-consolidated retail market. With local or regional grocery stores getting gobbled up by big corporations, just four companies — Walmart, Costco, Kroger, and Ahold Delhaize — control 65% of the retail market.
Though Walmart hasn’t disclosed its specific investment, the company will get the majority of beef produced at the facility as well as representation on Sustainable Beef’s board as part of the deal. This helps Walmart lock in its beef supply and provides another opportunity to amass power along the food supply chain.
When “Big” anything gets involved, it’s usually bad news for everyone else. It’s no different for Big Retail. Further vertical integration of Big Retail may harm ranchers’ ability to negotiate for more competitive prices and terms. Similar to the song and dance from poultry integrators, big retail corporations present a great deal to farmers at first. But it’s all about amassing control in order to maximize profits. This also opens the door for Walmart to become Sustainable Beef’s only customer so they can force the farmers to take lower prices until it’s no longer sustainable. Guess who will be there to buy out the company? In the end, it’s the farmers who lose.
We Need a Fair Food System
We need to create a system where independent processors like Sustainable Beef can thrive and gain market access without big corporations like Walmart taking over. Strengthening antitrust enforcement to break up the consolidation in the meat processing and retail markets is critical for expanding market accessibility. The USDA has several tools to level the playing field for market access, including programs like the recent grants to 111 smaller livestock and poultry processors, and utilizing its procurement power to anchor independent domestic meat and poultry processing. Check out our Fair Farm Bill campaign to learn more about how we’re creating a fair and resilient food system that works for farmers and consumers.
Written by Jessica Cusworth; edited by Dee Laninga; concept developed by Angela Huffman and Joe Maxwell