YANKTON, S.D. — The hog-and-cattle butchers of the world have drawn the ire of South Dakota's ranchers (and politicians).
Over the last few weeks, the state's top leaders — from Pierre to Washington — are drawing increasing attention on irregularities in the meat industry, focusing on alleged anti-competitive practices of the four companies that own America's meatpacking facilities.
On Tuesday, June 1, U.S. Sen. Mike Rounds, along with Minnesota's junior Sen. Tina Smith, authored a letter signed by more than two dozen colleagues to U.S. Attorney General Merrick Garland requesting a federal investigation into the "stranglehold" large meatpackers have placed on the market.
"For far too long, independent cattle producers have been forced out of the business while meatpackers continue to profit at the expense of the American consumer," said Rounds, in a statement.
Sen. John Thune has called for a senate inquiry into "possible improper and anti-competitive activity in the cattle market," and Rep. Dusty Johnson has signed a separate letter — along with Thune — calling on Garland to update Congress on DOJ's investigations in anti-competitive practices and their impacts on cattle producers.
Notably, however, neither signed Rounds' letter, suggesting the fragmented and sensitive political divisions of the cow-calf operator on the grasslands of western South Dakota to the feedlots in the eastern side of the state to the processing facilities and ultimately the grocery stores and dinner plates.
Back at home, on Thursday, June 3, Gov. Kristi Noem visited a new Rapid City venue for Dakota Butcher, a Clark-based small meat processor, to spotlight $5 million in federal coronavirus money her administration repurposed as grant dollars to small meat lockers and purveyors with fewer than 60 employees.
"I really believe it's been a really tough year for a lot of people. It's been a tough year for our meat producers, as well. COVID-19 has put pressure on the food and supply chain," Noem said. "But we've used that challenge to create new opportunities for others."
The whirling about-face in the industry — small-government conservatives teaming with liberal Democrats to saber-rattle using populist antitrust laws and invest in distinctly agricultural subsidies — is not surprising to a South Dakota economist.
"Across the whole agricultural industry, we've seen lots of concentration," said Matthew Elliott, an agribusiness specialist with South Dakota State University and professor in the Ness School of Management and Economics. While Elliott says "hard-evidence of price-fixing" remains to be ferreted out by a potential DOJ investigation, "huge convergence" of the nation's meatpacking giants certainly leaves the impression that something is amiss to independent producers.
"We've got 80%, 90% of the industry concentrated into four firms," said Elliott, adding that whether price-fixing is achieved by "people deliberately in smoke-filled rooms saying, 'This is how much of supply we're going to let out to create profits,' or it's done by signaling or watching what the other guy does to relatively optimize," might not matter to the rural cattle producer in Gregory County.
The panic buying, particularly around toilet paper and beef and pork in grocery stores, that accompanied the pandemic's start only drew attention to a problem that's been growing for years, say economists: a winnowing number of players running slaughterhouses and meatpacking facilities. Months before COVID-19, a fire at a Tyson plant in Holcomb, Kan., stunted supply lines across the nation.
Throw into that an international market — Smithfield Foods, for example, which operates the massive pork slaughterhouse in downtown Sioux Falls, is owned by WH Group, a Chinese conglomerate — and there is increasing anxiety in the public over the operations of meatpackers.
During a recent virtual roundtable, Rounds heard from ranchers across plains states who are feeling pinched.
"You're paying elevated prices for brown beef, steak, and other cuts at your local grocery store," said Adam Jones, a rancher from St. Francis, Kan. "At the same time, cattle producers are having difficulty marketing their cattle above the price of livestock — those two things are not sustainable."
Over 14,000 beef operations exist across South Dakota, generating over $25 billion to the state's annual economy, says an the South Dakota Beef Industry Council. Yet incomes for independent producers, particularly cow-calf ranchers on western ranges, has been tight for years.
Eric Iverson, a rancher from Mellette County, told Forum News Service on Thursday, June 3, said ranches like his keep rural communities afloat: From fixing the tires on his tractor to buying groceries and banking in town. He's expanded to over 1,000 head just to keep up with competition, but worries the relatively small profit he takes home no longer justifies his investment.
"We've been asking for this for years," Iverson said, regarding a DOJ investigation. "The antitrust law goes clear back to 1921 and was supposed to keep an eye on and be the watchdog for these big packers."
"We're more concentrated now than back then," he added.
While pandemic measures, including those by U.S. Department of Agriculture Secretary Sonny Perdue, under the Trump administration, to classify meat-processing workers as "essential" kept bigger operations running, the deeper problems for ranchers and producers remain for USDA Secretary Tom Vilsack.
Last month, over 100 legislators from across the country called on Vilsack to give producers more say over the National Beef Checkoff program, a marketing initiative that sells U.S.-grown beef that they say has failed to adequately target the American market.
Meanwhile, markets outside traditional routes, such as in local lockers, while still a niche, is growing. Small production facilities and lockers across the state have announced expanded operations with more interest in purchasing locally-grown and butchered beef.
"I love to see it,"" said Iverson. "But right now it's a band-aid. It's not [alone] going to keep me in the ranching business."