The so-called Big Four—Cargill, JBS, National Beef, and Tyson—have an optics problem, one which will not go away through price-fixing settlements or pointing to post-pandemic inflationary causes affecting the supply chain. From the president and politicians in Washington D.C. to everyday consumers on Main Street, fingers — not to mention proposed laws and plenty of investigations — are pointed squarely at concentration in the meat industry.

While history certainly does not repeat itself, this is not the first time the meat industry has dealt with accusations of price-fixing and anticompetitive practices, especially in the wake of a crisis. In the early 20th century, the Big Six packers—Armour, Swift, Morris, Fowler, Wilson, and Cudahy—faced the same scrutiny. The so-called Beef Trust cases and investigations from 1902 to 1922 should serve as a cautionary tale and guide for today’s meat processors.

The Big Six’s almost exclusive access to the rails and use of refrigerated cars, specifically, drew the attention of Congress and the Interstate Commerce Commission beginning in the late 1880s. For example, packers such as Armour owned private cars that transported live cattle and beef carcasses by rail. The railroads, in turn, would provide “secret rebates,” in the words of President Theodore Roosevelt, back to the packers. The packers and the railroads, as famous muckraker journalist Ray Stannard Baker wrote in 1905, “invariably hunt in pairs.” The government accused the packers of controlling market and pricing publications; manipulating, owning, and controlling guaranteed loan facilities; and controlling access points to the markets such as refrigerated cold storage facilities and terminal stockyards.

When considering these allegations amidst the growth of the industry in the late 19th and early 20th centuries, it is honestly hard to ignore the numbers. In 1880, the meat industry consisted of a few processing and distribution facilities. Within 17 years, the Big Six expanded to 20 plants and hundreds of distribution centers, or what contemporaries referred to as “branch houses.” When America entered World War I in 1917, the Big Six owned 91 plants and more than 1,000 branch houses. Moreover, the consolidation of the packers at terminal markets contributed to record profits. A packer with a terminal market needed to harvest at least 100 head per day to reach minimum efficiency and profitability. By 1900, the Big Six harvested about 1,000 hogs, cattle, and sheep per day.

Two years later, on May 10, 1902, the reformist Roosevelt administration, under the Sherman Antitrust Act of 1890, filed an injunction in the Federal District Court of Chicago against the Big Six that “restrained them from combining and agreeing upon prices at which they would sell their products in States other than those in which their meats were prepared for market.” The court made the temporary injunction permanent. In response, three of the Big Six—Armour, Morris, and Swift—merged into one company, the National Packing Company (NPC) in 1902. The merger set the stage for the eventual US Supreme Court decision Swift and Company v. United States (196 US 375) in 1905 that allowed Congress to regulate interstate commerce, including the meat industry.

The seminal US Supreme Court case, however, didn’t mark the end of federal regulatory action against the NPC, as the company’s growth and consolidation continued unabated. By 1910, NPC controlled almost 10% of meat production in the United States, but it was the big packer distribution system that continued to vex the newly minted Federal Trade Commission (FTC). According to the FTC, NPC owned and operated 90% of all branch warehouses in the United States, and those branch houses sold over 93% of all cured and fresh meat in the nation. The government argued that the distribution network placed a stranglehold on the consumer, ranchers, and farms, and the government unsuccessfully filed suit in 1910 and 1911. In 1912, after the federal government filed a criminal suit, NPC was acquitted of all criminal charges by a jury. Still, NPC voluntarily dissolved that same year because it became clear to the now Big Five (the others acquired Fowler Packing Company’s assets) that federal regulators would maintain sustained pressure on their operations.

It was not until World War I that the federal government acted again on charges of market manipulation and price fixing during the unprecedented crisis of global war. The impetus for this action was record hyperinflation, which rose a little over 19% from 1916 to 1918. Under this pressure, President Woodrow Wilson charged the FTC in February 1917 to investigate the Big Five and to recommend measures “to effect fundamental improvements.” The FTC published its investigation in 1919 and recommended a host of measures to eliminate anticompetitive practices, going so far as to suggest that the government take ownership of the stockyards and branch houses.

Shortly after the FTC’s report, the Wilson administration threatened to sue the Big Five if they did not divest their corporations of their stockyards and wholesale and retail outlets. The packers agreed to a consent decree and released their stockyards and warehouses. Congress, too, responded in 1921 with the passage of the Packers and Stockyards Act. The Act was upheld by the Supreme Court in 1922, and it has been amended 10 times throughout the 20th century — especially following times of high inflation.

As we collectively find ourselves in another period of high inflation following the crisis of the pandemic, my customers—large regional retailers, hotels, butcher shops, distributors, stadiums, and restaurants—are troubled by the fact that today’s Big Four are experiencing record profits while their margins are dwindling.

I do my best to explain that costs for all meat processors have risen, including packaging supplies, cleaning chemicals, equipment, repair parts, and labor. This is not to mention that the Big Four and smaller processors such as Kern Meat Company have spent considerable sums of money on Personal Protective Equipment (PPE) for their employees and upgrading their facilities to comply with OSHA standards.

There are certain market fundamentals that have proven to be inflationary, too. Drought has been an issue for most of the Western United States since July 2020, and the price of corn and soy have surged too. Moreover, we are in a global market, and the US exports of beef and pork set record after record in the first half of 2021 because of market and supply chain disruptions across the globe. Diseases, such as ASF and HPAI, have turned the global protein market upside down. The outbreak of war in the breadbasket of Europe—Ukraine—will disrupt food markets for at least the next three years.

My abridged explanation as to the underlying market forces affecting the meat industry remains unsatisfactory to my customers, though. They are struggling. Their margins are lower, their labor costs are higher, and the cost of goods is continually increasing in all segments of their business.

The Big Four need to take our industry’s history into account. Unlike their counterparts in the late 19th and early 20th centuries, today’s packers need to break the cycle of cowboy versus packer and federal regulator versus corporation. If the packers of yesteryear had taken a different approach, published some of their own findings, fully cooperated with the government, educated the public, and helped shape the narrative, the Packer and Stockyards Act of 1921 would likely look much different than what we know today. Based on current federal government action, it is likely to be amended again in the near future. What shape that will take is partially up to the Big Four.

Historically speaking: Fixing consumer trust in the meat industry

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