The Death Of Rural America: Greedy Monopolies And Farmer Suicides
Corporations are rigging the beef industry. It’s pushing cattle farmers into massive debt and raising prices at the grocery store.
Narrated by Beau of the Fifth Column for the Classroom
Coy Young: The bank’s breathing down your neck, they want their money and you know. I was just at a breaking point because I was just so upside down and I didn’t see any other way out and, you know, I just, I was gonna take my life and that day luck have it, my wife left, I had everything in order and was gonna do it and saw my wife. My wife forgot something that day and came home. So I hurried around and put the gun away and she walked in, and I changed my mind. You know, she, she saved my life..
Beau: Coy Young was on the brink in 2020. He’s a fourth generation cattle farmer
Coy Young: My father, my grandfather, my great-grandfather, we’re all cattle farmers.
Beau: And because of corruption and consolidation in the beef industry, he’s about to be the last: he’s selling off his entire herd and getting out of the business.
And he’s not the only one being affected. You, sitting at home watching this video, are getting ripped off by the same people that are forcing Coy to shutter his farm.
While beef prices in your local supermarket continue to skyrocket and America’s farmers suffer under increased costs, decreased sales and rising suicide rates, the Big Four beef monopolies are raking in record profits. The CEO of National Beef Tim Klein claimed during the pandemic that high prices on the shelves are simply a result of supply and demand!
[National Beef CEO Tim Klein]: The beef industry is the most purest form of capitalism in this country, I believe. As demand goes up, prices go up. If demand goes down, price goes down.
Beau: But those profits aren’t going to the farmers.
Coy Young: We’re at a breaking point. Either something has to change or there isn’t gonna be any American ranchers left.
Beau: This is The Class Room from More Perfect Union. And today we’re talking about how the beef industry got rigged.
How Your Food is Killing America’s Farmers
Beau: Coy is one of 14,700 cattle farmers who will have to sell their farms or go bankrupt this year. Since the 1980s, the United States has lost more than 44% of family farms and with them, the main streets and rural communities that they held together.
Coy’s story is like a lot of other ranchers: he was a smaller player pushed out because of decades of consolidation and anti-competitive contracts and he’s leaving his business in debt.
Coy Young: The bank must have called and said they needed the check, because their name’s on it too. It basically means they own you until you pay your debt.
Beau: Coy sold the last of his herd right after the New Year. We talked to him at Christmastime about how his family was getting by.
Coy Young: When you’re part of this life and you do it, you know the animals, you love ’em. I’ve been hanging onto these guys, my cows, for the past three years, thinking it’s going to get better. And it hasn’t… You lose your self-image as a man. I’m trying to get over it but it’s like the world doesn’t have use for you anymore. You need to do something else, is basically what I’m being told. The small guys don’t have a chance.
Beau: You might not know how cattle ranching works. So let’s break down the whole process for you from the farm to your local supermarket. First, there are the ranchers. Coy is a calf-cow producer. He raises cattle until they reach a certain weight
Coy Young: You basically raise the animals from birth, until they’re an average of 7, 10 months, 12 months of age, roughly. It’s more by weight. Once they get up to 500, 600 pounds, we sell them at the local livestock market.
Beau: Ranchers like Coy sell at auction, which is supposed to be an open market with price discovery, meaning ranchers bid based on what they expect the market to look like at any given time. They look at things like the weather, the price of grain, and international sales.
The cattle go on to a second rancher, known as a backgrounder, then on to a feedlot where they are fattened until they’re slaughtered. The slaughterhouses buy from the feedlots and package the meat, where it goes to you, the consumer.
Coy Young: You know, your prime ribs, your strip loins, your sirloin roast, and hamburger.
Beau: But in the last few decades the number of feedlots has decreased and the packers, the ones who slaughter the cattle, have consolidated.
This has had all kinds of consequences for consumers and farmers. For one, as consolidation increased, competitors dropped out, and ranchers had fewer buyers to sell to. What they were able to take home went down, way down.
Coy Young: Dad always used to say you could sell your calves in 1975 and buy a new Chevy pickup. Well that still holds true today. You can sell your calves and still go to the Chevy dealership and buy a 1975 Chevy pickup.
Beau: Just look at this chart. The consumer has been steadily paying more for beef while the farmer is earning less–ranchers get only 39 cents of every dollar spent on beef–whereas in 1970, they were getting 60 cents of every dollar
Peter Goodman: What we’ve got is extreme monopoly power. We’ve got a powerful concentration of the market in a handful of companies mirroring the historical situation a century ago during the robber barons.
Beau: Peter is an economics reporter at the New York Times. He writes about how the increase of monopoly power has reshaped the American economy.
He met Coy when he was working on a story not about American cattle ranchers, but about supply chain breakdowns in general.
Coy Young: He came up here and he was like, “Why are beef prices so high in the store and you’re going broke?” and I said, Well that’s the million dollar question…Cargill, Tyson, JBS and National Beef. Those are your four reasons that American farmers are going broke.
Beau: They’re known as the Big Four. You might not have heard of those companies, but if you’ve ever bought or eaten beef, you’ve gotten it from them. The Big Four own 85% of the beef market.
One way packers stifle competition is by making contracts with feedlots behind closed doors. Rather than going to auction, like Coy does, packers sign Alternative Marketing Agreements or AMAs, with the feedlots, circumventing the open market that ranchers rely on and depressing the market. 73% of sales now happen through AMAs.
And the pressure on feedlots to meet demand means they’ve consolidated as well. The bigger the feedlots become, the more tightly packed the animals are, which causes pollution in the land and water. High density feedlots also account for 7% of the emissions that cause global warming in the United States.
There really isn’t one part of the chain that isn’t feeling the squeeze–the consumer, the farmer, the animals, even the planet! Except, of course, for the packers.
Peter Goodman: The person sitting at home is paying more, not because the ranchers, the workers are getting fairly compensated for their labor. The person sitting at home is paying more so that we can give more money to the shareholders of those four giant companies.
Beau: To understand how this happened, Peter says we need to go back to the turn of the 20th century.
Peter Goodman: So if we just back up for a second, um, going back to 1906, Upton Sinclair writes his famous novel, the Jungle. The Jungle reveals to, uh, the American populace that these stockyards in Chicago, where there’s tens of thousands of cattle penned up and tens of thousands of workers, uh, laboring and just horrific conditions, you know, this is where your meat is coming from. And so there was this consumer outrage.
Beau: And they did step in. At that point, there was a high level of concentration in the beef industry: Five companies controlled 55% of the share of beef in the US. And it wasn’t just the beef industry that was monopolistic. That was true of the railroads, the steel yards, the coalfields and the banks.
Peter Goodman: So President Woodrow Wilson unleashes this probe by the Federal Trade Commission. And two years later, Congress passes the Packers and Stockyards Act of 1921.
Beau: The Packers and Stockyards Act banned meatpacking corporations from manipulating and controlling prices, creating monopolies, or restraining fair competition. Which, by the way, probably included creating captive markets, like packers do today.
This was the beginning of a series of reforms that strengthened our antitrust laws. For decades, there was bipartisan support for the idea that monopolies were bad for the consumer and bad for the worker. That all changed when a new philosophy on the regulation of corporations took hold, driven by economists at the University of Chicago School of Economics like Milton Freidman and Robert Bork – who you might remember from our explainer on Ticketmaster a few months ago.
Beau: Robert Bork believed consumers benefited from larger conglomerates because their supposed increased productivity would make prices go down.
Mergers and price discrimination, Bork argued, shouldn’t be as important to the government as “consumer welfare” – allowing companies to get cheap products to the consumer. His work had a profound impact on President Ronald Reagan, who reshaped our antitrust laws, undoing decades of worker and consumer protection.
Peter Goodman: We’ve essentially been marinated in this idea that scale is the way to produce stuff that people can afford quality products. That’s how we get innovation. History tells us otherwise.
Beau: The largest packers went from owning just 25% of the market in the late 1970s to now owning 85%.
Coy Young: It’s a huge bottleneck system… they control all the slaughter, and they control all the prices, and you’re at their mercy.
Beau: Consolidation at this scale means that the market is fragile and minor upsets can wreck the whole system. Think of early in the pandemic, when there was a beef shortage.
Slaughterhouses were shutting down because of COVID-19 outbreaks and ranchers had no one to sell their beef to. Prices were skyrocketing in the supermarket, but ranchers weren’t seeing the profits.
Peter Goodman: The pandemic didn’t create this situation. It had revealed this situation
Beau: That year Coy had financed a herd of Angus beef that he was hoping to make a profit from. This sale was set for March 15th 2020.
[Donald Trump]: Our supply chains in America are some of the most powerful in the world, and they’re all working very hard, they’re working around the clock.
Coy Young: And that Friday, the Chicago Board trade feeder cattle price tanked to 1 0 8 and it hadn’t been that low since November of 2010 or ‘11. I’m still recovering from it
Beau: That was when Coy almost decided to take his life.
Peter Goodman: When you subject people who are accustomed to being able to support themselves to circumstances in which it’s basically impossible to support themselves, there’s real trauma associated with that.
Beau: Coy runs a weekly group for other ranchers struggling in their business or with their mental health.
[Joshua Knop, from recording]: There’s nothing more that I’d rather do than to take care of cattle…and it’s also building a legacy. Something that my kids can have in the future and maybe even their kids.
Brett Kenzy: We’re ranchers talking about what we’re doing, but we’re just an analogy to the larger picture of America. It’s corporate power dictating what’s going on in the halls of Congress. And it is small business in general, not just, not just ranchers, small businesses under attack.
Beau: Coy has a side business running a barbeque catering company and he’s transitioning to that full-time. He’s also devoting time to helping other farmers. He testified before Congress in 2022 over price fixing in the industry.
[Coy Young at Hearing]: I come here before you today to try to save what is left of rural America.
Coy Young: You know, I do feel very passionate about this, to be an advocate for American cattle farmers. A lot of them are too scared to say anything. I don’t have any cattle anymore, I have nothing left to lose.
Beau: We don’t have to lose farmers like Coy, and we shouldn’t. The Biden Administration can enforce the Stockyards and Packers Act of 1921, which Coy likes to say the USDA is using as a doorstop now. It would mean ranchers like Coy wouldn’t have to give up on the work they love and the consumer wouldn’t be buying hamburgers that only profit shareholders of big conglomerates.
Peter Goodman: We need to push back on this idea that deregulation, and just allowing large companies to do what they will and pursue their own interest amounts to, uh, pursuing societal interests. That setup’s really good for the shareholder. But we know what happens when shareholders get more money. They put it in their bank accounts, they send it offshore to, you know, Cayman Islands bank accounts.
Beau: We’re in a second era of robber barons, just like Upton Sinclair wrote about at the turn of the century and we already know the solution: enforcing antitrust laws and increasing competition so that small farmers aren’t pushed out.