On the Outside Looking In?

“Clowns to the left of me, jokers to the right. Here I am, stuck in the middle with you.” This is the chorus to the 1972 hit song by the Scottish band Stealers Wheel, a song that rose to top ten on the charts when it was released and then had a second life after the film Reservoir Dogs used it. This phrase describes being in a polarizing or uncomfortable position between two undesirable options or sides. Essentially, the rock and the hard place conundrum but with a much catchier tune that sticks in your mind.

While this applies to many solutions, food and agriculture are not one of them. The farmers and the consumers are the clowns and the jokers. Farmers are left in a position where they can’t afford to grow food and the consumer can’t afford to buy it. The middle laughs while the rest struggle. So who is in this “middle”? The processors and the retailers.

Let’s use the meat industry as an example.  The “Big Four” meat packers, JBS, Cargill, Tyson and National Beef, own about 85% of the packing market. This leaves little room for independent processors.  These Big Four have essentially created a monopoly. They squeeze out independent processors by undercutting them and stifle new businesses by advocating for strict standards of entry. They stand behind the guise of safety, but the biggest thing these standards protect are their bottom lines.

This monopoly doesn’t just rob of us new businesses, it robs us of ideas. A marketplace is supposed to shift and be a hub of innovation. New ideas are pushed forward to gain an advantage and in doing so actually drive customer experience and product development. Instead, when 85% of an industry is owned by 4 businesses with a unending appetite for political donations and lobbyists, we find the producers and the consumers left in the cold.

Farms are hurting. Grain prices are horrendous and expected to actually lose money for farmers for the second year in a row. Animal production has seen its ups and downs, as disease and market factors have led to massive fluctuations in beef, pork, and poultry in the last 10 years. These boom or bust markets hurt both consumers and producers because the producer cannot plan financially with any type of certainty and the consumers food budget varies wildly.

The key to how these businesses manipulate the market is simple supply and demand economics. They get to a certain size (like 85%) of the market, and they can dictate what they are willing to pay to the producer because they are just about the only shop in town. They set prices just high enough that a farmer can survive but still be dependent on their business model to operate their farm. Then they process the animal and tell the consumer how much they will pay. They can constrict the supply of the product to match their price and drive demand. This is a simple, effective business strategy that works effectively across most industries. But while legal, you can argue the morality of it. You aren’t selling a tiered consumer product like shoes, where you can buy $30 shoes from Wal-Mart or $200 Air Jordans. Both effectively cover your feet and allow you to walk. But artificially choking supply for higher prices hits differently when it comes to food, something people have to have everyday.

Some of these companies even use a “tournament system”, primarily for poultry, where farmers compete with each other for revenue based on meat yield. These farmers have to bear all the risk and debt of operation, only to have the terms dictated to them by companies whose primary concern is shareholders. Many of these companies also pass along expensive facility and equipment upgrades that they sell to consumers as marketing tools, but it’s the producers who pay for it.

Let’s shift to the consumer side. Food prices rose at a rate of between 1-2% for most of 2000-2020. This kept with general inflation numbers, as the average is somewhere between 2-3%, and most families could absorb them. The COVID-19 pandemic messed this all up. Food production and processing is a cost driven industry, and like all cost driven economies, it requires cutthroat efficiency at all levels to drive profitability. Efficiency is great, but it also leaves weak spots. Efficiency is the enemy of durability. High energy costs, supply chain issues, and some rather timely fires (there is a whole conspiracy around timely fires at processing plants around the United States that tightened supply and increased profits) all lead to a surge in prices of 23.6% between 2020 and 2024. This is almost 3 times what the average should have been for that time period. Since then, we have seen food costs raise around 2.5% month over month, essentially leading to what used to be yearly jumps occurring every 30 days.

So if food prices are high, the growers and producers of food should be making a killing right? That’s what simple supply and demand economics would dictate, but that model doesn’t account for a chokehold in the middle. Its like a dam. If the river is allowed to flow freely, everyone along the banks gets their piece of the pie. But the processors have created a dam that chokes the free flow of an industry and allows them to slow it to a trickle, creating a premium on the water that comes through. Monopolies inhibit the market, stifling innovation and inflating consumer prices for the sake of appeasing shareholders. So what do we do? How to we create a system where consumers can afford food and producers can move off the precipice of financial collapse? It starts with antitrust movements put in motion by the federal government. There have been a number of monopolies throughout American history, with oil and communications being the most famous. The government has to take a long look at these companies and aspire to parity within an industry. This always leads to the moral argument of the governments interreference in both the free market and capitalism, but in the case of food I think we should move past these and to the heart of the issue. People cannot live without food and farmers. 2% of the United States population is currently engaged in growing food for the other 98%. If changes aren’t made soon to bust monopolistic practices and allow farms to return to profitability, our family farms and our food security as a whole might soon be at risk