Concentration
I stood in the bread aisle the other day, visiting about supply chains with, Jamey, the owner of my local grocery store.
Bread that used to be delivered daily comes to his store twice a week now.
Meanwhile, Walmart and Costco dictate daily deliveries and prices so low that the bakery loses money on each and every loaf.
The bakery pays overhead costs with those huge, discounted orders.
Independent stores pay higher prices so the bakery earns its direct production costs and a bit of profit.
But bakeries are not the only food manufacturers who signed a deal with the devil in an effort to grow.
Jamey told me about a processor who signed a contract with Walmart, then borrowed money to build two huge new plants to meet Walmart’s requests.
Walmart demanded more.
The processor declined.
Walmart pulled the contracts.
The growing business filed bankruptcy.
It turns out that bread production and distribution – and most other grocery items -- are a lot like beef.
The U.S. food system is so concentrated that two or three buyers set prices and demands for service.
Suppliers either play by those rules or don’t play at all.
Consumers vote for the winners with their dollars.
Almost always at the expense of their livelihood.
I told Jamey about his cashier who scanned my groceries before dashing off her shift.
After work, she planned to drive 50 miles from Conrad to Great Falls to buy cheaper groceries.
Even an economical car costs 55 cents per mile to drive.
Calculate it yourself if you don’t believe me, but be sure to include all of the expenses.
So that cashier’s round trip cost $55.
Because bread is 39 cents cheaper in Great Falls.
A pound of ground beef can be purchased for $4.99 instead of $5.99.
This was on my mind after talking to Jamey so I mentioned it to my cattle producer friend, Seth.
He reminded me of the businesses in every rural town just 30 years ago.
Each town had a dairy that made cheese, ice cream, and butter, along with providing fresh milk.
The local bakery offered fresh donuts and rolls that could not be beat.
The meat locker provided local beef that had not been mixed with nasty old floor sweepings after cutting out the puss pockets.
Our spending choices erased those businesses.
Industry concentration not only leads to unfair business practices and shady food quality, it creates opportunity for price gauging, corruption and theft.
In fact, this week computer hackers shut down one of the largest beef processors in our nation for a day, eliminating almost a quarter of the supply of steaks and burger with a single click of a malware mouse.
At this time last year, in the depths of food shortages, the four largest beef processors that control more than 85 percent of beef processing in the U.S. were earning $600 per head on each steer that was cut and wrapped on their lines.
To offer a bit of context, if a cattle producer or a feedlot manager makes $50 per head, that’s an outstanding profit margin.
While the Big Four were earning record profits last year, live cattle prices dropped to far below break-even prices.
The outrage at greedy price gouging that crippled consumers who needed healthy food was deafening.
Today, processors are earning $1,000 per head, almost double last year’s gouge.
Several ag organizations met to discuss how to curb price gouging and the insane bully-profiteering.
In response, the largest beef processor globally, Brazilian-based JBS, revoked its membership to the largest beef organization in our country.
Prices haven’t dropped yet, but the crooks have blinked.
Our money matters.
Our voices matter.