That was my response after reading Consumer Reports' recent ground-beef product safety test. The non-profit company went red-meat crazy by purchasing 300 packages of beef from supermarkets, big-box stores, and organic food retailers across the country. They then tested the meat for all manner of unhealthy bacteria.
The results weren't appetizing. Tests showed a basic level of fecal contamination, the kind that can cause blood or urinary tract infections, in 100% (!) of the ground beef. Furthermore, 20% of the meat tested positive for a bacteria that causes a million cases of food poisoning each year. And about 1% contained salmonella, the microorganism behind 19,000 hospitalizations and 380 deaths in the U.S. per year.
Consumer Reports recommended that meat fans cook ground beef thoroughly and try to buy sustainably raised beef wherever possible, since it has a lower prevalence of these dangerous bacteria. They also highlighted a major structural risk of the meat industry, that it's dominated by just four producers accounting for over 80% of all beef processing in this country.
Those leading cattle-slaughtering companies are:
- Tyson Foods (NYSE:TSN), the nation's largest beef producer. Tyson facilities can process up to 175,000 cattle per week. The company booked $16 billion of beef sales last year alone.
- Cargill. With 153,000 employees and $120 billion of annual sales, Cargill is one of the largest privately held companies in the world. Subsidiary Cargill Beef processes 8 million cattle and 8 billion pounds of boxed beef per year through its eight plants in the U.S. and Canada.
- JBS USA is a subsidiary of Brazil-based JBS S.A., which is the largest beef packer in the world. JBS USA operates nine cattle processing plants across the Midwest.
- National Beef is the fourth-largest cattle processor, with market share of 13%. After a failed acquisition attempt by JBS S.A. in 2009, National Beef is now a subsidiary of holding company Leucadia National (NYSE:JEF).
Why it matters
The controversy over such a large concentration of beef production centers around pricing and safety worries. Since massive processing companies carry so much weight in the market for cattle, they can drive prices down for ranchers and feedlots, hurting their businesses in the process.
And higher up on the value chain, the lack of competition at the grocery-store level can push prices up for consumers. That's why the U.S. Justice Department challenged the proposed purchase of National Beef by JBS S.A., saying "competition in the sale of boxed beef to grocers, food service companies and ultimately American consumers" was at risk.
But the bigger concern is over food safety, as Consumer Reports just highlighted. Since so much supply is being handled by so few companies, the potential for regional or even national outbreaks is enhanced. Albert Foer, president of the American Antitrust Institute, recently told The Wall Street Journal that mergers are adding fragility to the food supply chain. "As you become more and more consolidated, with fewer and fewer redundancies, the opportunities for catastrophic breakdowns expand," he said. And that's true no matter how important food safety standards are to these four beef giants.
What you can do about it
Red-meat fans have a few options available to them if they want to reduce the risk associated with eating beef. You can ask for well-done burgers at restaurants and purchase more sustainably raised beef during your next grocery shopping trip. You can also shift consumption away from ground beef and toward whole cuts like steaks and roasts. Since bacteria tend to exist only the surface of these cuts, as opposed to throughout mixed ground beef products, the cooking process is more likely to remove all of them.
But the trend of increasing concentration of beef processing isn't likely to reverse. Just as in any industry, scale efficiencies give the big players major advantages over smaller rivals. And the leaders will always seek to maximize those benefits by growing bigger still.
Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool owns and recommends Leucadia National. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.