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The Food Economy THE US FOOD ECONOMY'S RULE OF FOURS By Berit Anderson Why Read: Food itself is perhaps the most basic good in the modern economy, but there's nothing basic about the food economy or its supply chain. This week's Global Report is all about the food economy's Rule of Fours and how consolidation is impacting US food supply. ______ I've never personally differentiated a person who dressed up in a three-piece suit and goes to Wall Street from a person who dresses up in a polyester uniform and works at McDonald's. I think it's all drag. - Ru Paul Stay out of the middle of the supermarket. - Michael Pollan
Earlier this month, McDonald's sued the top four beef distributors in the US - CMS, Tyson Fresh, Swift / Packerland, and National Beef - for price fixing. Together, the suit alleges, the four companies and their subsidiaries now control 80% of the US beef market; and they've been colluding to artificially inflate prices and reduce beef supply since 2015. As alleged in detail below, by at least the beginning of 2015, Defendants began exploiting favorable market conditions to launch their conspiracy. More specifically, Defendants began to coordinate on the prices they would pay for fed cattle. They also coordinated on their respective cattle slaughter volumes. Thus, over time, the output of beef was reduced resulting in higher beef prices for purchasers like Plaintiff, through its assignors, during the Conspiracy Period. Industry data shows Operating Defendants' transition from competition to collusion by managing the price of fed cattle and the industry slaughter volumes. Management of their respective slaughter volumes during the Conspiracy Period is shown in Figure 1 below, which tracks their quarterly slaughter volumes and shows them moving in tandem.
The filing follows a spate of earlier suits by other groups against beef packers, including one filed by cattle farmers that was thrown out in court. You know things are bad when McDonald's suddenly seems like the good guy in the midst of a national beef oligopoly. Unfortunately, it's not just beef that's controlled primarily by four top competitors.
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