Rerun: The packers get Standard Oil'd. Then what?
Prime Future 313: Strategy, capital, and innovation in animal protein
This headline in Meatingplace caught my eye:
It took me back 256 weeks to this headline:
That was an early thought exercise, purely hypothetical, to consider what the implications might be if the packers were to be broken up in the same way Standard Oil and the early trusts, including the beef trust, were in the early 1900s.
My caveat was and is that the thought exercise was neither political commentary nor prediction, but rather a look at the hypothetical implications of a hypothetical scenario that has a zero percent chance of happening.
What’s interesting is the context switch from five years ago: in spring 2021, packers’ gross margins were peaking at ~$1,000 per head, while today packers are averaging ~$300 per head losses. And, cow-calf producers went from grossing ~$0-100/head in 2021 to ~$800-1,000 in 2026. That’s the cattle cycle, baby.
And yet, the fantasy of reducing packer concentration lives on in some imaginations and political machinations.
While I’ve written about the nuance of the meatpacking industry and the cattle cycle (here, here, and here, for starters), it is not the only industry in which the natural laws of economics and capital structure create a pull towards scale, which can ultimately result in concentration.
David Dayen argues in the book Monopolized that this phenomenon is actually true of most modern industries. His examples range from airlines to soda and from healthcare to cereal, where a handful of companies maintain majority market share.
Again, that’s not a political statement; that’s an observation. That’s reality.
With that broader context, and seeing the cattle cycle so starkly do its thing over the last 5 years, take a minute to enjoy — or counter — this throwback to one of my favorite Prime Future editions in the archives, inspired by Ron Chernow’s tome about John D. Rockefeller and the early oil industry: Titan.