The Daily - ‘Who Do You Want Controlling Your Food?’

Episode Date: January 28, 2022

During the pandemic, the price of beef shot up. Wholesale beef prices increased more than 40 percent — more than 70 percent for certain cuts of steak. The conventional wisdom was that price increases simply reflected the chaos that the coronavirus had caused in the supply chain. But there’s evidence that they were in fact a reflection of a more fundamental change in the meatpacking business.We speak to ranchers about the consolidation of the industry and explore what it can show us about a transformation in the American economy — one much bigger than beef. Guest: Peter S. Goodman, a global economics correspondent for The New York Times.Want more from The Daily? For one big idea on the news each week from our team, subscribe to our newsletter. Background reading: Despite record beef prices, ranchers aren’t cashing in — the result of years of consolidation. For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday.

Okay, from the top. All right, here we go. I'm Peter Goodman, and I write about the global economy for the New York Times. And during the pandemic, I started to notice something. Customers are now paying more than ever for beef. Beef was getting a lot more expensive. Retail prices at record highs. In 2021, wholesale beef prices shot up more than 40 percent, and certain cuts of steak increased by more than 70 percent.

Meat lovers, beware. Now, the conventional wisdom was that the beef industry was just reflecting the chaos of the pandemic. Now, a major meat packaging plant is now closed because of an outbreak. Two employees of JBS and Greeley... We learned that slaughterhouses shut down because of coronavirus outbreaks. Grocers are having a hard time keeping beef and other items in stock. There's a combination of product shortages and high demand. And that was causing a shortage in supply.

But I started to hear from sources who were telling me that there was a lot more to the price spikes. That this represented something larger and more fundamental something I've been tracking for years hey Peter Goodman at the time how you doing good I appreciate you taking the time yeah so I started calling ranchers hi gosh right on time thank you so much so where are you by the way you're in Missouri And what they all told me. Basically all my life, our percentage that we get as a consumer dollar has just been going down. Is that despite the expensive prices of meat that Americans were paying at the store, the profits weren't trickling down to them.

In the last couple of years, it's just gotten kind of to the point of ridiculousness. And this, they said, was not a new phenomenon. A lot of people don't understand how trapped ranchers are in this really broken system. We don't have another way. The pandemic hadn't caused this. It had exposed it. Everybody either works two, three, and four jobs, feed America, and go broke doing it. It's sad. Now, if you're not making money, though, like, how are you able to keep doing this? Well, I'll tell you what. I don't know how we're going to keep doing it. That's a good question.

There's a lot of farms and ranches going out of business every year. What was going on in the beef industry reflected decades of transformation in the American economy. Why isn't that money going to you, though? That's the million-dollar question. Such a high demand for beef, why was it going down? There was no reason for it to go down. And it was bigger than beef.

I will live and die by a free market, but if I'm not a good producer, you know, the market should be able to tell me that and say, well, you know, you can't be in business because you can't produce economically. And I will live and die by that. But we do not have a free market and it doesn't give a reward to the right people. It doesn't give a reward to the right people. This transformation was affecting all of American life. Supply and demand simply wasn't working the way it used to.

Well, Steve, it's great to talk to you. And I really appreciate you helping me understand this. We got this podcast called The Daily. So I decided to go out to Montana with my colleague, Daily Producer Diana Wynn, to talk to ranchers. I just think this is a subject that really needs some exposure. And so anyway, I will be looking forward to having you come out. This is fantastic. Okay. Thank you so much. You bet. You bet. We'll talk again.

Take care, Steve. Bye. Bye. It's Friday, January 28th. So, Peter, where in Montana did you and Diana end up going? Check, check. I'm just going to, I'm recording now. I'm just going to record everything. So we flew into Billings and then we got in the car.

We started driving north past the usual strip malls and supermarkets and the city gave way to a smattering of suburbia. And suddenly we're in the middle of these snow-covered, empty plains. This is amazing. This is truly, like, wide open. You're just in one of those places where you just feel like the horizons could be, like, hundreds of miles away. Looks like an excellent place to be cattle.

Yeah. Yeah. Okay, we're looking for mile marker 19. There's mile marker 12. We had a hard time finding the place. Sorry, have you seen another mile marker? And after a fair bit of circling around and wondering where we were...

That's not a black mailbox. We found ourselves on a long dirt road. Okay, I think this is it. Oh, somebody's waving. Okay, we're here. And then eventually, we found ourselves at the ranch of Steve Charter, a third generation cattle rancher, and the man we had come to see. Hey, how you doing? I think you're in the right place. I'm guessing you're Steve. Hi. Okay, right on. This is Diana. Hi, Diana. Glad to meet you. Glad to meet you, Peter. Nice to meet you.

By the time we'd arrived, Steve was waiting for us out front. I think we're going to go up and feed the cows, if that's all right. And it's time to feed the cows. What kind of cows are these? The black ones are Angus. The red ones are Red Angus. And then there's a few other kind of breeds in here. They'll be much happier once we feed them.

What we learned is that Steve is a cow-calf producer, meaning he's got a bunch of heifers, and they give birth usually in the springtime. They're very cute, the calves. I know, they're very cute. They're really kind of adorable. And he raises the calves until they eventually become part of the beef supply. Are you guys both meat eaters? I happily eat meat. Okay, good.

Yeah. So we come back to the house to spend time with Steve and his two adult children, Annika and Ressa, both of whom work on the ranch. And Annika starts cooking lunch. And as we're waiting for this delicious smelling meal, we notice this painting that's on the wall. There's this gallant looking man atop a horse in the saddle,

a cigar sticking out of his mouth as he's holding the reins. And we ask, who's this? And they tell us, that's the outlaw. He was like a lot of Wyoming ranchers. They had kind of shady beginnings. Wait, that's your dad? That's my grandfather. This is Steve's grandfather.

It's a little unclear. You know, the history is a little unclear. My dad was a great storyteller and is in great storytellers. Maybe everything he said wasn't exactly true or he filled in. So as the story goes, Steve's grandfather is born in Iowa, but he makes his way west to Wyoming. With Butch Cassidy and Harry Longable. Where he actually fell in with Butch Cassidy and the Sundance Kid, and he joins their gang that was robbing railroads at the time. So the reason they could be successful is they kind of had the support of a lot of the people because they were robbing the

railroads and the banks and nobody liked the railroads and the banks. He decides to go legitimate around 1910 and he moves to Jackson, Wyoming, where he buys himself a cattle ranch. And so they were one of the early settlers in Jackson Hole. And this is the man who started it all. And looking back to man who started it all. And looking back to that time, Peter, how do you think about someone going from a Butch Cassidy-style outlaw to cattle ranching? Well, Steve's grandfather enters the beef industry at really a foundational moment in American history. This is the Wild West. And at this point, Europeans have pushed Native Americans off their land, and they're living in what they view as a frontier. So there's this real

opportunity to harness all this land and turn it into wealth. And in places like Colorado, Wyoming, Montana, Nebraska, Kansas, ranching becomes a dominant part of the economy. In fact, it becomes the largest part of American agriculture. So there's money to be made here. Oh, there's a great deal of money to be made. But remember, this is also the era of American history where the robber barons are dominant. When Steve talks about public support for Butch Cassidy and his gang taking money from these railroad titans and bankers, that's who they're taking it from, the robber barons. These are the giant industrialists like John D. Rockefeller, Andrew Carnegie, J.P. Morgan.

And it's during this time that these robber barons are trying to basically establish dominant positions in all the big industries of the day railroads electricity oil finance and they're doing it by buying up all the smaller guys and consolidating consolidating And this totally transforms the American economy. By taking control of these markets, they're able to take control of the terms of the markets, the prices, the costs. They crush labor. And when they turn their attention to the cattle industry, what this looks like is they go around buying up all the local slaughterhouses and turning them into these giant slaughterhouse conglomerates so that by 1917, there are just five dominant so-called meat packers in the whole country. These are the companies that slaughter cattle and distribute them. And the result is just horrifying conditions inside these packing plants, not only for the animals, but also for the people working inside the plants.

The public comes to learn about unbelievably crowded meat packing plants that reek of rotting flesh, trash, innards lying around, attracting rodents. And along with this growing understanding of these terrible working conditions comes this broader awareness of the robber barons and how they're growing richer and richer. They're monopolizing the bounty of American capitalism, and their wealth is really coming at the expense of everyone else. Eventually, there's outrage against these industrialists. It comes to a head, and we get a wave of regulation. And in the cattle industry, we get the Packers and Stockyards Act of 1921, and it's aimed directly at the meatpackers.

It bars them from price manipulation. It bans the big packers from giving preferential deals to ranchers that they're aligned with and from discriminating against others. This is truly a landmark piece of legislation that levels the playing field in the beef industry. I'm happy to report that after years of uncertainty, culminating in the collapse of the spring of 1933, we are bringing order out of the old chaos with a greater certainty of the employment of labor at a reasonable wage and of more business at a fair profit. And ultimately, this era of government cracking down on the excessive power of big business,

combined really with the trauma of the Great Depression, delivers FDR's New Deal, a monumental change to American life. Which rests upon us all. We have the right to expect that this driving power will be given patriotically and wholeheartedly to our nation. This is really the new economic landscape that Steve's dad enters when he decides to follow in his father's footsteps 30 years later as he arrives in Montana in 1950. Ranches were dirt cheap at that time here. It was like they bought their first ranch for like $3 an acre.

This is where Steve is born, where he grows up with his three siblings. They're all engaged in the day-in, day-out operation of tending to the herd. You said in the third grade, you were driving machinery around? That's also when I started driving the pickups and things. Nine years old, you're driving a pickup. Is this on the property or on the highway today?

On the property, yeah. Well, sometimes on the county roads. But when you push the clutch in, you'd have to go down. So like you lose all visibility for a while, shift and then kind of come up where you can see above the dashboard. And I don't know, we just nobody thought anything of it. You know, I mean, but every year the big moment they're building toward comes when they load up their cattle into stock cars and drives them the couple of hours to Billings, to the auction house. You're always kind of like, oh God, I hope we don't have a blowout because you're doing it on old tires.

The auction house was this place where you'd have sellers like Steve's dad coming from all over with their cows, from clear across Montana, from as far away as the Dakotas. And then you'd have buyers coming in some cases from even further away, from Nebraska, from Colorado, all looking to buy cows. This big, bustling, noisy town market. You know, when we would come to town, that was the social place. That's where you'd go and see your neighbors and friends. And so that was always a big part of my life. It was like, you know, it was always kind of a cool place to go.

It's important to understand that the decision to take their animals to the auction, that was about the most important decision they could make in the course of the year. It really determined their income for the year. If they thought the market was going to get better, you know, and they're, you know, they're looking at the commodities prices on the Chicago Board of Trade. They're talking to their neighbors to see what they're receiving for their animals. If they think they're going to make more later, then they keep feeding their calves. They let them run around on the pasture, and they accept the increased cost of caring for them, assuming that they'll capture a better price

down the road. And if they think the market's going to worsen, then they're more likely to load the animals, take them to the auction, and get rid of them. What was that like? Could you get a fair price? Yeah, I mean, it was more competitive then. And they have some confidence in those years that the auction house is a real market. You know, there are representatives from the packers. There are buyers for feedlots. There are large numbers of people crowding the stalls, looking at the animals being led in on display. the stalls, looking at the animals being led in on display. And there's kind of a frenzy of buying when there's demand. So ranchers like Steve's dad have some assurance that once they bring

their animals to the marketplace, there's truly a market that will give them a fair price for their animals. Right, because the era of consolidation is over. That's right. The era of consolidation is over, and there are now lots of slaughterhouses. There are medium-sized companies. There are larger companies. But there are all sorts of channels that the charters can use to sell their animals. So typically, the day ends happily.

You've got that check. You can pay your bills. You can pay the bank back. And his dad drives home satisfied with a check in hand that's big enough to cover his costs, to pay for the debt on his land, and to continue

at a real middle-class standard for another year. But as Steve grew up, he wasn't sure that this was the life for him. I didn't really have any intentions of being a rancher. Until he met a woman named Jeannie from Chicago. Part of the reason I think she wanted to get married is she was just totally attracted to this life. You know, she loved animals, she loved the horses, she loved the business, she loved the horses. She loved the business. She loved the country. That was the end of any thoughts of Steve giving up ranching. But actually, it was Steve's father who counseled him to get out and do something else.

He did everything he possibly could to discourage me and everybody else to going into ranching because he saw all this coming. me and everybody else to going into ranching because he saw he saw all this coming he saw it all coming like what did he see that that these family farms and ranches wouldn't be viable you know my dad kind of convinced me that it probably wasn't the best thing to be doing but on the other hand i couldn't really imagine doing anything else. So Steve hears his dad's warnings, but he decides to keep going. And when Steve's dad dies in 1979, Steve ends up taking over the ranch. Thank you very much. Thank you very much.

That same year, a man named Ronald Reagan announces that he's running for president of the United States. I've lived in an America where those who often had too little to eat outnumbered those who had enough. And I've seen our country face financial ruin in the Depression. As president, I would use every power at my command to make the federal establishment respond to the will and the collective wishes of the people. We must force the entire federal bureaucracy to live in the real world of reduced spending, streamlined function, and accountability to the people it serves. That's why I'm seeking the presidency. I cannot and will not stand by and see this great country destroy

itself. And that sets in motion a series of events that once again transforms the American economy and eventually turns Steve's dad's fears into reality.

Thank you very much. Thank you. We'll be right back. lies ahead, and I don't believe the American people are frightened by what lies ahead. Together, we're going to do what has to be done. We're going to put America back to work again. So, Peter, what role does the Reagan administration play in this story? Well, Reagan ushers in a period of extraordinary deregulation. He really represents the bookend to the New Deal. Overregulation causes small and independent businessmen and women, as well as large businesses, to defer or terminate plans for expansion.

We have inflation in great measure because the federal government has lived too well. And by that, I mean it has become bloated. Now, we have no intention of dismantling the regulatory agencies. However, we must come to grips with inefficient and burdensome regulations, eliminate those we can, and reform the others. Our aim is to increase our national wealth so all will have more, not just redistribute what we already have, which is just a sharing of scarcity. If we view the New Deal as a reaction to excessive monopoly power by the robber barons, Reagan represents a whole new view of government in which government, as he famously puts it, People keep looking to government for the answer and government's the problem, is not the solution but the problem itself. He embraces the thinking of Milton Friedman, the economist who's considered the sort of godfather of neoliberalism, who represents the idea that a market left to its own devices is

the best way to maximize wealth for everyone. The essence of a capitalist system in its pure form is that it is a system of cooperation without compulsion, of voluntary exchange, of free enterprise. And who actually specifically calls the robber baron era... The robber baron myth. A myth. The myth that it was a period in which particularly the farmers of the middle west were being ground beneath the rapacious activities of

the wall street financiers. Reagan also embraces the thinking of another important academic Robert Bork who plays a crucial role in changing the American understanding of antitrust law. My entire book is premised on the question of what best serves consumers, but everything in that book is an argument from consumer welfare. So previously, monopolies were simply seen as bad for everyone. Well, Bork argues and becomes mainstream in this view that so long as consumer prices are unchanged or dropping, then we should actually welcome scale. Reagan embraces all of this. And his administration makes clear things are going to be different now.

And a whole new set of principles are operative. It's time to try something different, and that's what we're going to do. And Peter, what does this all actually look like as we start to see these new principles become policy in the U.S. under Reagan? Basically what happens is, and we're talking about across every industry, the Reagan administration stops enforcing antitrust. They don't challenge mergers. This allows big companies, just like in the early 1900s, to once again go on buying sprees,

including the meatpackers. When was the first clear sign that, you know, uh-oh, the economics of this thing have changed and maybe my dad was right and this is where we're headed, to a place where it's not viable to make a living doing this? That was in the mid-80s. That's when, you know, the packers started consolidating. And then at the same time, we were also aware of what was happening in the chicken and hog industries. The packers promise that through this consolidation, through engaging in these large deals, they're going to revolutionize the food industry.

They're going to lower beef prices for American consumers through economies of scale, which will allow them to cut costs. They concentrate slaughterhouses in fewer and fewer hands. And just like we saw in the last century, they start closing down competitors. The result is that once again, ranchers like the charters are left with fewer options for where they can sell their cattle and they're getting less for their animals. So what this means for Steve and his ranch is that by the late 1980s, more years than not, he's barely breaking even. So, you know, when the prices started getting, you know, where I knew it wouldn't cover the cost, then we decided, well, there's got to be a different way. So we started exploring different ways.

He turns to this slaughterhouse that he used to do business with. Initially, he probably went out of business in probably the early 70s. And then I was actually involved with some ranchers that tried to get it going again back. And they do this because they're hoping to inject more competition in the marketplace. Instead of simply having to sell to the packers, who are operating fewer and fewer slaughterhouses, they'll have a local option where they can slaughter their animals. So the way I've heard the story locally is the Packers get wind of this project, and they set about to sabotage it by briefly paying a premium to local ranchers to deprive the Billings Slaughterhouse of the volume that it needs to break even. Long story short, in less than a year, that plant closes again, and the charters are out $100,000.

It was kind of a disaster, and we lost a lot of money. It was a very unpleasant prospect. So Jeannie then has another idea. This is Steve's wife. Why don't we just try to circumvent the Packers altogether? Instead of dealing with the middleman, let's sell our beef directly to the people who are distributing it to customers. That's supermarkets. And so Jeannie had got to know this. There was a grocery store in Billings called the County Market, and he had been very cooperative in doing these beef promotion kind of things. So she went to him and said, you know, we could probably get

these slaughtered locally. And would you sell our beef? He was receptive to that. So we went up, set up in the parking lot. The first weekend, they drive down to Billings, they grilled samples of their beef, and it was hugely popular. People were like, wow, this is great. So we were there having a great time selling beef. People were coming in with, this is great. So we were there having a great time selling beef. People were coming in with grocery carts, filling it up to take it home and freeze it. You know, it's like it was, you know, and we were going, yeah, this is going to work. But then? Went by the meat manager who we talked to and he said, oh, that's funny, the buyer from IBP, which was one of the big ones at the time, Iowa Beef Packers, he said, oh, I haven't seen him in a long time.

The manager at the store tells them that the packers paid a visit and told them that this was no go. They had to stop buying beef from the charters. We can't sell your beef anymore. If we buy your beef, they're not going to supply us, and that's our main supplier. And Jeannie was going to, she wanted to keep, go on. And I said, God, I'm not going to lose the ranch over this. So I basically kind of chickened out and she kind of went along. But it kind of took the heart out of me as far as fighting these things. So that marks the end of the Charter's efforts to find a way to work around the Packers. And

they resign themselves to selling their cattle inside the system where they know that year after year, if everything goes right, they'll be fortunate to simply break even. But Peter, this whole approach to government and deregulation, as you said, is about the consumer. So as the charters see less and less money for their meat, that is translating to cheaper beef prices for American consumers, right? translating to cheaper beef prices for American consumers, right? Yeah, for a while. But this idea that Bork advances that so long as consumer prices don't go up immediately after a merger, well, then we shouldn't be troubled. This just doesn't pan out. What consolidation really does is it gives these massive companies like the meatpackers control of the supply chain. They

can control not only the relationships with the ranchers, but also the other end of the equation. They can dictate the prices that they're going to charge grocery stores and supermarket chains and restaurants. And the result of this is that they're ending up with fatter profit margins while everyone else ends up with less. This is the story not just of cattle ranchers and meat packers, but really of the American economy writ large going back to the 1980s. Well, let's talk about why that continues to be the case. Obviously, at some point, the Reagan administration ends. So what happens once that era is over? Well, Reagan represents the beginning of the story, but it's really just the beginning because what we've seen happen since, I mean, really in every administration that follows

is an unwillingness to challenge this idea that the bottom line matters above all else. And that goes for Republicans and Democrats. I mean, you might be tempted to think that liberal Democrats would be the natural opponents of monopoly power. But there's this interesting dynamic that we see time and again, where that view bumps into the promise of low costs for poorer Americans. And we see Democrats repeatedly siding with producers promising to deliver food at lower prices through greater scale.

promising to deliver food at lower prices through greater scale. Our administration is working hard to give the American people a government that works better and costs less. Thanks to the work of Vice President Gore, we are eliminating 16,000 pages of unnecessary rules and regulations, shifting more decision-making out of Washington back to states and local communities. You see this with Bill Clinton, who especially embraces the idea that consolidation is positive for Americans. And when it comes to beef, positive for the food supply and for programs that depend on cheap food, like food stamps. So he and other liberals look away from their maybe natural aversion to monopoly power, and they embrace this idea that's sold to them by the packers that the best way to defeat poverty is to support the interests of big corporations like the meatpackers, because in theory, it's good for poor Americans.

Well, that's the story that everybody buys into, lubricated by campaign donations, by lobbying, that the war on poverty requires low-cost food, and the way you get low-cost food is by large, efficient companies that are allowed to amass scale, continuing to consolidate the marketplace. And thus, we arrive at a bipartisan consensus that it's okay for the packing industry, and really every industry, to get smaller and smaller and more and more consolidated. That's right. So by the early 2000s, the beef industry enters its biggest wave of consolidation.

Major acquisitions in the processing industry top this week's cattle industry news. We see the industry increasingly concentrate. Sanderson Farms is being acquired for $4.5 billion. Year after year. JBS, the Brazilian company that acquired Swift and Company last year, has announced the purchase of Smithfield Beef Group and National Beef. We see large players swallow up smaller players. Tyson Foods officially announced it has reached a definitive agreement to buy the Keystone Foods business

from Marfrae Global Foods for $2.16 billion in cash. We see the smallest players disappear, unable to compete. The company's plan to combine Sanderson Farms with Wayne Farms, a continental grain subsidiary, to form a new privately held business. The Smithfield acquisition also includes Five Rivers Cattle Feeding, the nation's largest cattle feeder.

We see the biggest players of all expand their reach so that they're ultimately as large or bigger than they were in the previous century. But these latest announcements are likely to raise more concerns about competition in the industry because they would essentially consolidate the nation's third, fourth, and fifth largest beef processors into a single entity. And by the end, just four packers, Tyson, Cargill, JBS, and National Beef Packing control 85% of the beef industry. Compare that to the 1970s.

The four largest packers then controlled only 25% of the market. Things are now even more concentrated than they were before the Packers and Stockyards Act of 1921. Wow. We remember before the impact of all that original consolidation was that these big companies engaged in cost cutting and in abusive labor practices, which of course led to these horrific warehouse conditions. What's the impact of all that consolidation this time? Well, in some ways, the impact is even more profound because at the same time this is playing out, we're experiencing globalization. I mean, you can now ship goods much more cheaply around the world than you could previously. And this becomes a serious source of change in the American economy. Look, we want to have a fair and open shot at the Chinese market. China enters the world stage. Built on open markets with fair and effective rules. Becomes

a global trading power. I don't believe that our goal should be to close the U.S. market. I believe our goal should be to make sure that we open up China's market. Now factories, whether they're union or not, discover that they're vulnerable to production being shipped over to China. Where people can make things much more cheaply, where you don't have the same workplace standards, where you don't have environmental restrictions or unions. Our administration has concluded more than 200 separate trade agreements,

each of which opens someone else's markets wider to American business. And Clinton, of course, is being lobbied by industrial interests who are keen to cut costs so they can reward their shareholders. We fought for NAFTA, which created a free market with our neighbors. Signs NAFTA, which puts the U.S. in a trade block with Canada and Mexico. We have to negotiate trade agreements to open even more markets. So for workers in the U.S., there's now a serious vulnerability to seeing their jobs moved elsewhere or their wages downgraded under threat of having production moved elsewhere. This plant will be here for another hundred years.

Well, the Janesville, Wisconsin General Motors plant isn't even going to last the rest of the year. Back in February, Senator Barack Obama made a stop at this plant to make a speech on the economy and to inspire hope in these auto workers. Now GM has ended that hope by announcing that the company is stopping the production lines. Large SUVs like the Yukon, Tahoe and Suburban are all built here. Around 1,200 jobs are disappearing. A lot of the people who had been able, even with just a high school education, to earn enough in a factory to pay for a middle class lifestyle, they're now taking jobs at Walmarts. Celebrated the opening of its 1,000th domestic super center. Stocking shelves.

All right, Amazon hiring once again the company looking to recruit. They're working in Amazon warehouses. Workers from fast food chains like McDonald's, Wendy's, KFC. They're working in Amazon warehouses. They're working in low-paid service sector jobs, maybe fast food restaurants. So a lot of people who've been accustomed to middle-class standards of living are now living on a lot less, and they're unhappy about it. I'm on the edge of homelessness right now. Me and my husband, we have to alternate days, who eat and who don't. A lot of people who used to feel a relatively stable economic situation are now suffering constant gnawing insecurity. Take cattle ranchers. They used to earn more than 50 cents on the dollar of every dollar that Americans would spend on beef. That number has dropped to a historic low of 37 cents, which explains why since 1980,

we've lost 544,000 beef cattle operations. That's beef cattle farms and ranches since 1980. cattle farms and ranches since 1980. Wow. So that represents 540,000 jobs in our economy that are now just gone. Oh, it's far more jobs. That's just ranches themselves. So that means not only are you losing the people within families who are working on those ranches, the maintenance people who take care of irrigation systems, the guy who gets hired to drive a tractor, the truck driver who gets enlisted to drive the animals off to the sale barn, all of those jobs are lost. And at the same time in the past 25 years, we've lost 75% of the feedlots. That's 83,000 independent feedlots. These are the marketing outlets for the cow and calf producers. You know, the whole competitive infrastructure has just been compressed.

And as a result, there are fewer working opportunities for millions of people. So, Peter, where does all of that leave Steve? Where are we in his story? Well, this is like the backdrop to the state of things for Steve in recent years. And then we get to 2019. It's actually a year that's not looking too bad. It's one of the years where Steve thinks he's on track to at least break even. And that year when he's doing his market calculation, do I sell my calves now? Do I keep feeding them longer and hopefully make more by selling them down the road?

He decides that he's feeling bullish and he decides he's going to pay to have them placed at a feedlot rather than sell them as calves because he thinks that the market is going to strengthen and he'll get a premium for bigger animals later. So we put them on feed and then everything's looking good. The market's going up. The futures are going up. Beef was selling fine. Beef was moving high price. And then it was when the first rumors of the pandemic, you know, back when it was just in the one city in China. Then we start to hear about this coronavirus. Investors worldwide start selling everything, including cattle futures. But now, a crash in the market in just the last week.

COVID-19 could cost that industry billions. Cow-calf producers will be hurt the most. So Steve thinks this is going to be bad. I don't see this getting better anytime soon, so I better find somebody to buy my calves right now. He's got three rounds of calves coming up that he needs to sell. For the first round, he calls up the guy who's feeding his cattle. This guy has a relationship with JBS, one of the big four meat packers in the U.S. He called up and said he would not bid on the cattle,

but if we wanted to get them slaughtered, he could give us a slot. And if we didn't take that slot, there wasn't any guarantee. Basically, what this guy at the feedlot is telling him is, you've got one chance to sell your cows to JBS and get them slaughtered. One slot. It's got to be on this one specific day. It's not up to you. And you're going to have to take whatever price they decide to give you that day. And you won't know that price until your animals show up. And I'm thinking, oh God, I don't

want to do that. But Steve also sees the writing on the wall with COVID and he's got to unload his animals right now. It's this or nothing. And so I go, well, I guess, I guess you better take this lot. And he's thinking, maybe I'll get a dollar 30 per head. That would be breakeven money. Then he gets a call back from the guy at the feedlot. Without any consulting or any dealing, they just decided that they were going to pay me a dollar a pound. They're going to give him a dollar. So he's going to lose 30 cents a pound on this round. Wow. And he's still got more cattle to sell. So a few weeks pass. Time for the second load. And I said, man, you know, make some phone calls. See if, you know, offer these cattle to somebody else.

I mean, they're a bargain. You know, they're making $500 a head off these cattle. Surely somebody else will come bid on them. But no, nobody else will even come look. No one else is even willing to look, let alone make an offer. I mean, this is the spring of 2020. The slaughterhouses are by then experiencing COVID outbreaks. The state of Colorado soon shuts down a JBS plant in Greeley where six people ultimately die.

So there's less capacity at the plants. And that means there's less demand for cattle. So on the second round, Steve gets 90 cents a pound. Wow. So now he's losing 40 cents a pound. Yeah. And what's especially crazy about this is that at that time, consumer demand for beef had never been higher. People were making runs on grocery stores. They're trying to stock up. They're filling their freezers with provisions for the apocalypse. They want beef. And Steve has all these cows. But with the Packers dominating the middle, there's no way to bridge

the two or for Steve to see any gains from this tremendous surge in demand for beef. It's all losses. Supply and demand, in other words, are totally disconnected. Well, they're connected, but the packers are capturing everything that's in the middle. So Steve's daughter, Annika, is watching this bizarre moment unfold. Grocery store shelves were empty. People couldn't find ground beef.

You could see a cow across the road and people weren't finding ground beef in Billings, Montana. And she's thinking, this doesn't make any sense. We have more cows than people. We have more cows than people. At this point, the charters have only this third load of cattle left, 40 head. And Annika thinks to herself, why would we go back to JBS again? I mean, we know they're just going to stick us with another loss. So she thinks, let's try something different. Let's try cutting out the middleman, just like her mother tried to do back in the 1990s. With the grocery store parking lot scheme.

That's right. It was very nerve wracking. We were sticking our neck out here. We had no idea whether we could sell all those cattle, and then can you get them slaughtered? Then you got all this beef. Well, then you got to put it somewhere. They locate a local slaughterhouse. It's pretty small scale,

but it's able to slaughter the leftover 40 head. They find cold storage. Annika has some social media experience and she makes a Facebook page. And I posted it and then it got shared probably like, I think 10,000 times and just around, around this community. And then, and they actually do really well. They sell the rest of the 40 cattle, and they make an extra $40,000. Wow. With that extra $40,000, I would say, wouldn't you say we probably broke even? Or maybe...

From when they were calves? Yes. Mm. I doubt it. I doubt it. But, like, I do feel like this is... The first time customers' eyes were wide open. They're not in control of their food supply.

There is bigger powers that are in control of their food supply. And that's a really scary thing when it's all about control. I mean, who do you want controlling your food? Who do you want controlling where your food comes from and the price of that food? Do you want it one big corporation? Do you want it one big company? Or do you want it from people like us

who are literally fighting all their lives to try and make it better for us as ranchers, which in turn makes it better for the consumer. It's interesting, Peter, I do think there was a moment, this moment really early on in the pandemic, where consumers were thinking like this. They were asking deeper probing questions about the supply chain and where their products were coming from, because the level of disruption had been so great, and things felt so vulnerable and so broken. But ultimately, wasn't that what that was? It was a moment.

And maybe during that moment, people felt good getting their beef from a local rancher or buying masks from somebody selling them down the street. But once the supply chain started to catch up to the moment, it feels like most of us went back to normal. And that meant wanting cheap stuff and easy access to it. Well, you know, first of all, the supply chain has really not gone back to normal. If we ever reach something we'd call normal. There are huge numbers of shortages. We don't have computer chips, so we can't make enough cars from lumber to paint to workout clothes. We've seen shortages of products and we've seen prices go up very dramatically. This is why the Federal Reserve is raising interest rates and why the stock market is tanking.

Some parts of the American middle class that have been squeezed and diminished for years have seen a momentary readjustment in the balance of power with the giant companies that dominate the American economy. Truck drivers, I mean, there's a job that's really been downgraded. Truck drivers are now getting recruitment bonuses. They can jump ship and get big raises. recruitment bonuses, they can jump ship and get big raises. There seems to be a momentary readjustment in the power balance between labor and big business. But it's not something that likely sticks. I mean, yeah, okay, Anika shows that you can do an end run around the packers for some small smidgen of the marketplace. There's some consumers who've

woken up to the fact that the food supply is being dominated by big businesses. They're more inclined to go buy beef from their local rancher. And maybe that's useful for the handful of people who can take advantage of that. But the big story, the story of American capitalism being dominated by a handful of well-connected billionaires who have managed to manipulate the system through a lifting of antitrust enforcement, through a diminishing of labor, that story remains in place. That's the story of the working class and the middle class being wiped out time and again. We've been seeing this hollowing out across America for decades, and the pandemic presents an interesting test case,

but the basic balance of power remains. When my dad said my grandpa saw the writing on the wall, even at the time when my grandpa was selling cows, it was apparent, and maybe more apparent to him than others, that was the strategy. Eventually they will get into the position, which I think we are seeing now, where they can give us whatever price they'd like.

And they have. There's things that don't have monetary value. And so it's kind of the shits that it comes down to at the end that it's just about money. But, you know, I've pretty much worked seven days a week, 365 days a year. I mean, I get a few days off. And I'm not complaining because I was doing exactly what I wanted to do,

loving it, but it's also at this stage in life as well, maybe there's something else I could do. Maybe there's something else I could see. Do you think they're going to? Who knows? You know, what keeps us in it without monetary reasons is that we can't stomach quitting. It's an incredible life you got.

Yeah. It's really special. Yeah, I don't, I count my blessings every day. I do. Yeah. I hear that. Okay, have a good trip. Thanks, Steve.

Bye. Bye. In a speech last week, President Biden called the consolidation of American industries like beef a threat to the free market economy and vowed to use his power as president to try to reverse it. Look, in too many industries, a handful of giant companies dominate the market in sectors like meat processing, railroad shipping, and other areas. This isn't a new issue. We end up with an industry like the meat processing industry, where four big companies dominate the markets. Pay ranchers less for their cattle they grow, charge consumers more for beef, hamburger meat, whatever they're buying. Prices are up.

Look, I'm a capitalist. But capitalism without competition is not capitalism. It's exploitation. Reporting for this episode was drawn in part from Peter Goodman's new book, Davos Man, How Billionaires Devoured the World. We'll be right back. Here's what else you need to know today.

I'm here today to express the nation's gratitude to Justice Stephen Breyer for his remarkable career of public service and his clear-eyed commitment to making our country's laws work for its people. In a speech on Thursday from the White House, President Biden formally accepted the resignation of Supreme Court Justice Stephen Breyer, whom he praised as a man of principle and civility. But let me say a few words about the critically important work of selecting his successor. Turning to Breyer's successor, Biden said he would make his choice by the end of February. And that person will be the first Black woman ever nominated to the United States Supreme

Court. black woman ever nominated to the United States Supreme Court. And reaffirmed that it would be a black woman, saying such an appointment was long overdue. I made that commitment during the campaign for president, and I will keep that commitment. Today's episode was produced by Diana Nguyen, Lindsay Garrison, and Robert Jimison, with help from Austin Mitchell.

It was edited by Lisa Tobin and Paige Cowett, contains original music by Marian Lozano, Dan Powell, Alisha Ba'itub, and Corey Schreppel, and was engineered by Brad Fisher. Our theme music is by Jim Brunberg and Ben Landsberg of Wonderly. That's it for The Daily. I'm Michael Barbaro. See you on Monday.