This is exactly what I feared would happen after Trump failed to use his authority under the Packers and Stockyards Act to block Tyson from shutting down its giant beef plant in Lexington, NE, last month. The Big Four meatpackers who control 85% of the U.S. beef market have apparently succeeded in using the persistent high beef prices which their own plant shutdowns facilitated to get Trump to loosen restrictions on beef imports.
The Big Four have long sought to get restrictions on beef imports lifted because they own foreign plants with excess capacity and/or lower cattle costs. By importing more beef trimmings — which are used to make ground beef and processed beef products — from their foreign plants, the Big Four can reduce the amount of U.S.-produced cattle they need, lowering their cost of production and improving their margins.
In a competitive market, the expanded availability of lower-cost foreign beef trimmings might be expected to spur meatpackers to cut beef prices to consumers. But, of course, we don’t have a competitive beef market. Since most (if not all) significant foreign plants with the capacity to export beef to the U.S. are controlled by the Big Four, opening the door to beef imports won’t expose the Big Four to any real competitive threat. And since the Big Four already control the U.S. beef market and beef prices are already extremely high, none of the Big Four needs to take sales from the others — certainly not by cutting prices — in order to reap higher profits. They can just use imports to cut their costs while keeping beef prices high, and watch their margins grow wider.
Meanwhile, as a result of Trump’s executive order, America’s ranchers will now face lower demand for their cattle. This will force U.S. ranchers to accept lower prices, and the lower prices will prevent them from growing the national cattle herd from its current record-low size — potentially starting a vicious cycle. Persistent low U.S. cattle output could invite more cheap imports over time. The cheap imports could keep U.S. cattle prices depressed, which could push domestic cattle output even lower — gradually shrinking the U.S. cattle industry until it can’t feed the country anymore.
In short, this executive order may well spell the end, not only of America’s cattle industry, but also of America’s food sovereignty. I can’t imagine a more wrongheaded policy.
