What Does Corporate Consolidation Mean for Your Thanksgiving Turkey?

November 23, 2021
Ruocaled/flickr
Rebecca Boehm
Economist

Food prices have risen dramatically over the course of the pandemic, especially over the last several months. You’ve probably felt it at the grocery store check-out and may be dreading your final Thanksgiving shopping trip.

What you might not know is that turkey prices in particular have skyrocketed since mid-October, according to new data released by IRI, a company that tracks retail prices and consumer purchases. Prices for meat and poultry products overall rose more than any other food category during the pandemic, but turkey prices jumped 25 percent compared to the same week in October last year, far exceeding the price increase for all other meat and poultry products. The price spike is so bad this year that today Senator Elizabeth Warren called for the Department of Justice to investigate top turkey and poultry companies, including Tyson Foods (the #5 turkey processor in the US).

Of course, some of the turkey price spike is part of a standard holiday lead-up: more demand for turkey means prices rise. It may be that turkey prices also rose more than usual late last month because of good pandemic news—vaccine availability for 5-11-year-olds, booster shots for adults, and declining case, hospitalization, and death rates in many places—and the prospect for Thanksgiving dinner to be more normal than any year since 2019. This is all just basic supply and demand.

But the sharp increase in meat and poultry prices is driven in part by a deeper and more problematic economic dynamic: consolidation in the industries that slaughter and process meat and poultry products, including the birds many of us eat on Thanksgiving. And these dynamics and problems—which need urgent policy attention—are worth noting and reflecting on in this season of gratitude.

So let’s talk turkey.

Turkey industry 101

According to the most recent data from USDA, there were 23,000 turkey farms nationwide in 2017, which produced about 100 million turkeys in the same year.  In fact, one of these 23,000 turkey farmers, Andrea Wall, a turkey grower under contract with Farbest Farms (read our report to learn about this contract system) was at the White House this week to help President Biden pardon two special turkeys, Peanut Butter and Jelly.

All these turkeys have to get slaughtered or processed either into the whole turkeys a lot of people eat on Thanksgiving, or into parts, deli slices, and ground turkey. The US turkey slaughtering and processing industry does this in 111 plants scattered across 31 states, according to data obtained from the USDA’s Food Safety and Inspection Service (FSIS).

These plants are BIG according to our analysis of the same FSIS data. In the case of the biggest plants, thousands of workers slaughter and process roughly 4,700 animals in a single hour, for a total 10 million birds per year. Nearly 69% of these plants slaughter 100,000 or more per year.  

Turkey slaughtering and processing is a big, consolidated business

The turkey slaughtering and processing industry, like much of the meatpacking and poultry processing industry, is big business. Butterball, a familiar name, is the top turkey processor in the country, and has been for the last five years, according to data from the Watt Poultry rankings that we compiled. In 2021, Butterball processed 1.3 billion pounds of turkey, followed closely by Jennie-O Turkey Store, which processed 1.2 billion pounds. In total, the top 20 turkey processing companies processed 7.1 billion pounds of turkey in 2021. Butterball, Jennie-O Turkey Store, Cargill Protein, and Farbest Foods make up the top four processing companies.

Economists use a measure called a 4-firm concentration ratio to determine how consolidated an industry is—which tells us how much of a market or industry is controlled by the leading four companies in it. We’re interested in this measure of market concentration because when just a few companies control a market or industry, it’s consumers, workers, farmers, and even competitor businesses that can be negatively impacted.

For example, as we reported earlier this year, Tyson Foods has monopoly-like control over the chicken industry in Arkansas, controlling nearly two-thirds of the processing market in the state. Our report found that Tyson’s rise to the top of the industry coincided with a significant loss of chicken farmers—even as the state saw a 1,000-fold increase in total chickens produced—and a worsening of conditions for poultry plant workers.

Tyson’s economic and political power was on display last year when the company ran an ad in the New York Times begging then-President Trump to keep plants open despite the dangers of Sars-CoV-2. The administration caved, as Freedom of Information Act documents revealed lobbyists representing the meat and poultry processing industry helped to write an Executive Order that seemingly forced plants open. 

Back to measuring market concentration. While economists typically use sales or revenue of the top four companies in an industry to calculate 4-firm concentration ratios and assess market concentration, those data aren’t publicly available for the turkey industry. Instead, we use a proxy measure—millions of pounds of turkey processed per company per year—to evaluate the concentration in the industry. While it has its limitations, this measure can tell us something about the level of competition, or lack thereof, in the industry.

The top four turkey processing firms controlled 56 percent of all pounds of turkey processed in 2021. Economists begin to get concerned about concentration when the four-firm concentration ratio is greater than 40 percent.  Based on the proxy measure of pounds of turkey processed per company per year, we think policymakers should be concerned about concentration in the turkey industry.

In the chart below I add in the #5 company, Tyson Foods, to show the share of the market controlled by the top five companies in the industry. While not currently one of the top four turkey firms, Tyson is the number one company in US meat and poultry processing, ranking second globally, so it’s a big player in the industry generally. More importantly, Tyson has been moving up the ranks in the turkey industry, increasing its output of processed turkeys more than any of the top four companies in the industry since 2017, according to the data we compiled from Watt Poultry USA Turkey Producer Rankings. As turkey consumption increases, Tyson appears to be looking to expand into the market, having recently launched turkey-focused products like its Lunchable-style snack packs.

Just five companies control 62% of the turkey processing market in the United States, according to our analysis of processing volume for the top twenty companies, according to Watt Poultry USA 2021 rankings of Turkey Processors.

As the data clearly show, the majority of the turkey processing is controlled by just a few companies.

Concentration in the turkey industry spells trouble for Thanksgiving, workers, and communities

As President Biden’s recent Executive Order on Competition in the US Economy indicated, when industries consolidate and competition weakens, Americans are “denied the benefits of an open economy.”

What the Biden Administration means by that is that consolidation can allow corporations to exert significant control over a market or industry, which in turn can have negative consequences for many people. When consolidation becomes so extreme–for example, at the levels we observe where Tyson Foods dominates–it can become impossible for employees to bargain for better wages or working conditions. Recent reporting shows that companies in the highly consolidated meat and poultry industries have so much power over their largely immigrant workers that workers routinely soil themselves while working on the processing lines because they are not allowed bathroom breaks. What’s more, they have used their political clout to convince federal officials to ease restrictions on processing line speeds, making plant workers jobs all the more dangerous.

When just a few companies dominate an industry or market, they can engage in coordination or price fixing, which is when companies set prices synchronously with their competitors. This is much easier to do when just a few companies are in a market.

In some cases, companies get caught in the act. Earlier this year, the top turkey companies–including Butterball, Cargill, Cooper Farms, Kraft Heinz, Hormel Foods (which is owned by Tyson Foods), Farbest Foods, and Foster Farms–were sued by a group of direct purchasers of turkey for alleged price fixing.

Price fixing cases are common in the meat and poultry industries. Tyson Foods, Pilgrim’s Pride, and other chicken industry giants had to pay nearly $100 million to settle three separate price fixing lawsuits brought against them by broiler chicken purchasers. Cases have also been brought by farmers who allege that these companies are cheating them on prices, too.

But why does this matter to a regular person like you or me? Most of us probably assume that food system consolidation doesn’t really impact our day-to-day lives. That’s wrong for three reasons.

First, consolidation can lead to higher food prices. The spike we’ve experienced during the pandemic is largely driven by increases in meat and poultry prices. And there’s evidence to suggest that the size of plants and consolidation in the industry played a part in driving supply disruptions and changes in prices.

Second, low-income families spend a larger share of their income on food compared to wealthier families. That means they get hurt the most when food prices rise. In the US, nearly 1 in 7 people receive federal government assistance through the Supplemental Nutrition Assistance Program, benefits which do not increase if food prices increase. In other words, at least one in seven people experience real harm by food system consolidation that can lead to higher food prices.

Third, the COVID-19 pandemic has revealed how consolidation can have devastating and long-lasting consequences for our communities and well-being. As I reported in a blog in October, several studies show that meat and poultry plants increased transmission of SARS-CoV-2 in their surrounding communities. In particular, researchers found a strong link between increased processing line speeds and community transmission of the virus. The size of these plants, which tend to slaughter and process millions of animals in a year, played a big part in driving infection rates. But the companies who own these plants used their political power, acquired in large part by industry consolidation, to avoid implementing COVID-19 protections for their workers.

Solutions exist, but require countervailing political power

We can address the root cause of industry consolidation by improving our federal government’s oversight of market competition, mergers, and acquisitions with the existing powers it has. Senator Warren’s announcement today is a good first step in that direction. Oversight of consolidation and competition in markets is largely within the purview of the Federal Trade Commission and the DOJ, and both agencies have some power, if only they would use it, to prevent further consolidation. The Biden administration has signaled–through its recent executive order–that it will address competition economy-wide more effectively using the powers that it currently has at its disposal.

Other agencies play a role, too. USDA could do a lot more to rein in corporate titans such as Tyson Foods by more effectively using its powers within the Grain Inspection Packers and Stockyards Administration to deter corporate meat and poultry processors from exploiting farmers. The Occupational Health and Safety Administration needs to implement stronger protections for plant workers, too. Our report earlier this year lays out additional specific policies that would go a long way to rein in Big Turkey, Big Chicken, and all the rest.

The major bottleneck to achieving these reforms is the influence that corporate giants such as Tyson Foods have on our policymakers and federal officials. Countervailing this power will require grassroots, people-powered action, much like what Magaly Licolli is leading in Arkansas to organize poultry plant workers. In this season of gratitude, we should be thankful for groups such as Venceremos in Arkansas, the HEAL Food Alliance, and many other grassroots groups who are leading the charge against corporate abuses in our food system.