Big Meat

Rising beef prices are a big part of recent inflation. Did American bovines go on strike demanding retirement benefits and health care?

Senator Elizabeth Warren planted a portion of the blame on Big Meat. In 1877, the four largest meat packing firms controlled 27% of the market. Today, they sell 82% of America’s beef. While retail prices for steaks, and hamburger are up nearly 40%, ranchers are getting only about 10% more per pound for beef on the hoof. If all that money flowing from consumers’ pockets is not going “back to the ranch”, who is getting rich here?

“Not us,” says Big Meat. “All of our costs for labor and transportation are going through the roof.” Actually, their profit margins are up 70% from last year. Those labor and transportation costs are not killing them.

Economics 101 teaches us that “laissez faire”, free market capitalism delivers the lowest prices and best products. When many sellers compete with each other on a “level playing field”, everyone benefits. Back when there were multiple airlines, flyers not only got low fares but plenty of legroom and hot meals. The food wasn’t necessarily great but it was free. Then Piedmont merged with Allegheny to form USAir which was absorbed by American. Now, flyers pay extra for “exit row” and “bulkhead” seating, not to mention baggage and in some cases carry-ons. “You want food on your flight? Buy it at the airport before you depart.”

Hospitals need oxygen. Big hospitals need lots of it. That is why they have Liquid Oxygen tanks adjacent to their buildings. There was no difference between Air Products’, Linde’s or Airco’s liquid oxygen back in the 1970s when that “Big Three” dominated the US market. According to Economics 101, there should have been cutthroat competition and low, low prices in the hospital LOX market. In fact, the “Big Three” divided the market and set prices at a handsome level of profitability for everyone. “Who cares? Medicare pays for it anyway.”

When it came time to raise prices, the “Big Three” would take turns being the first to do so. By the time, hospitals requested bids from the other two, everyone’s prices were at the higher level. “Those gypsies at Linde screwed you over, but our costs are higher now, too. We have to match their price.” Next year, Airco or Air Products would be the evil gypsies and so on.

Senator Warren has a point. When a “Big Three” or a “Big Four” dominate a market, prices rise, consumers suffer, and the only people getting rich are the monopolists. Shame on you, Big Meat.

By Ed Dufton