With the support of the Federal Government, ranchers are working to rid themselves of the profitable meat packing companies. This article highlights the similarities between the locums and meat industries while providing guidance for practitioners and the government to eliminate staffing agencies.
America, we have a beef problem! Inflation is real, and the inflation seen with meats is outrageous. At the time of this article, inflation is hovering around 8-9%, while meats are priced at least 15-30% more than before the Covid-19 pandemic.
We are undoubtedly seeing corporate greed from the meat packing companies as they have driven up prices throughout the Covid-19 pandemic. The numbers don’t make sense! Yes, the operating expenses have gone up, but not to the same degree as the profits the four major meat packing companies report. Even though the larger meat packing companies have reported tremendous profits, they have not proportionally compensated the ranchers for selling their cattle.
This has upset the ranchers and President Biden’s administration. The current price gauging has motivated ranchers to disrupt their industry by cutting out the larger meat packing companies, the middleman, to have greater returns on their cattle. The government has responded in several ways to help independent ranchers cut out the traditional meat processing plants.
This article looks at the following:
In the meat industry, ranchers raise cattle until they become large enough to sell at auction to feedlots. Those feedlots fatten up the cattle and sell them to meatpacking companies. The meat is then processed, cut up, and sold to grocery stores and distributors. Eventually, the meat is purchased by the consumer, us, the grocery shoppers. In the meat industry, there are at least three middlemen involved from when the ranchers raise the cattle until the end consumer eats the meat from the grocery stores. These days, ranchers make very little profit, if any, from selling their cattle at auctions. The feedlots and grocery stores make only a small cut, whereas the meat packing companies produce the most significant margins and profits from selling meat.
To compare how the meat industry is run to how the locums industry works, imagine that the practitioners are like the ranchers and the grocery shoppers are like the facilities (i.e., hospitals/clinics).
Feedlots are like 3rd party vendors in the locums industry (ie: LocumsMart and other staffing agencies).In the locums industry, most practitioners know of just one middleman, the locums company they work for. Many do not know that many times there is a 2nd middleman or even a 3rd. That 2nd middleman, like the feedlots, takes a small cut. A locums job posting board like LocumsMart will take a 3.5% cut. Sometimes, locums companies and staffing agencies will need a practitioner but do not have one available. Thus, they will be forced to outsource the job to another locums company or staffing agency, thereby having two staffing agencies making a cut off the practitioner’s services.
The meat packing companies are the largest middleman and the most profitable in the meat industry, similar to locums companies. Meat packing companies make significant margins off the hard work of the ranchers, while the locums companies profit considerably off practitioners’ services.
The USA’s largest four meat packing companies control 65-85% of the market (Cargill, Tyson Foods, JBS, and National Beef Packing). They have total oversight and control of the meat market from distribution to pricing. This is how they have been able to manipulate the current market to boost their profits.
Due to a lack of competition in the market, one could easily see how these four meat packing companies could carefully, without formal measures in place, collude to move the price of cattle, limiting cattlemen’s ability to earn more for their cattle. This has been referred to as “tactile” collusion in the meat industry.
Most ranchers are forced to sell their cattle at auction to feedlots as there are few other options. At the auction, the cattle price fluctuates minimally and does not adjust based on how much the meat packers sell their meat to grocery stores. Without a greater return on their cattle, ranchers struggle to pay their increasing overhead costs.
The relationship between the ranchers, feedlots and meat packers can seem unfair. This is especially true in the current market where meat packers are making significant profits, yet cattlemen do not see greater returns on their cattle. The meat packers can alter the price of meats at the grocery stores to account for market demand and their overhead. If customers are willing to pay more for meats at the grocery store, then prices go up. When this happens, the ranchers cannot charge more for their cattle because they are locked into what they can sell their cattle for at auction. This has allowed the meat packing companies to make profits that are 2-3 times what they were before the Covid-19 pandemic.
Wouldn’t this upset you? Well, it certainly has upset the ranchers.
Ranchers are also concerned that as the price of meat at grocery stores continues to rise, families may change their dietary habits, significantly affecting the industry long-term. Families can already be seen purchasing less meat and altering their diets away from meats.
One option for ranchers to avoid working with meat packing companies is to sell “Direct-to-Consumer.” Ranchers could fatten up the cattle instead of the traditional feedlots and then sell the meat directly to customers. Customers could also buy the cattle before they go to the feedlots. Thus they would need to fatten them up and then slaughter them. Most Americans don’t want to buy an entire cow at once, nor do they have a large enough freezer. Some families will purchase the meat and split it up to make it more doable for all parties.
The second option for ranchers to avoid working with larger meat packing companies is to sell their cattle to meat lockers. A meat locker is basically a butcher shop where customers can come to purchase portions of the cattle once the meat has been processed, butchered, wrapped, and frozen.
Purchasing the meat directly from ranchers or meat lockers can significantly reduce the price of beef by 20-50%. Not all customers can do this, so what are ranchers to do if they want entirely to rid themselves of the profit-hungry meat packing companies?
Cattlemen in the Midwest are attempting to eliminate the need for traditional meat packing companies and go independent. Ranchers are investing in their own meat processing company, Sustainable Beef, LLC. The aim is to run a business similar to a co-op so that cattlemen can make more on selling their cattle. The idea has so much traction that even Walmart has invested in Sustainable Beef. Walmart sees the value in Sustainable Beef as it will hopefully lower the price of meats for their customers and treat the ranchers better.
In 2022, President Biden raised his concern about the lack of competition in the meat market, leading to meat prices that far outpaced the inflation rate. Recognizing that greater competition in the market could bring down the prices in the meat industry, Biden’s administration pledged to provide $1 billion in grants and loans for new independent processing plants. In addition, the USDA has made changes to the Packers and Stockyards Act so that there is greater transparency between the ranchers and meat processing plants.
It has been reported that over 500 hospitals in this country are on the verge of closing due to high operating costs and a shortage of practitioners. With so many hospitals spending unnecessary money on staffing agencies, why have we not figured a way around them? We need a “direct-to-consumer” model that allows practitioners to contract directly with facilities without needing a middleman for locums-type work.
Just as the meat packing companies have exploited the current demand for meat along with their control over ranchers for their financial gains, so too have the locums companies. The locums companies have used the shortage of healthcare workers to boost their revenues. It’s time for a change in the locums industry.
Locum practitioners must build an active community that freely supports each other in the mission to contract directly with facilities for locums-type work. We need a community voice that preaches the importance of working with practitioners directly for locums, part-time and non-traditional employment roles. No longer should facilities have to go thru expensive job boards or staffing agencies to find practitioners directly. Collectively, practitioners should work with malpractice carriers to overcome the need to work thru the locums agencies just for malpractice insurance. More so, practitioners must work with hospital administrators, healthcare attorneys, the federal government, and other parties to redefine fair pay for locums practitioners contracting directly. At some point, practitioners should advocate that it is “commercially reasonable” to pay practitioners well to contract directly rather than with a staffing agency.
Unlike the meat industry, the federal government has yet to set any initiatives to combat the cost of staffing agencies that supply temporary practitioners, allied health professionals, and nurses, which makes up a large part of our current healthcare cost. The federal government has not provided enough guidance to facilities on how they can contract directly with practitioners rather than pay more for a locums agency.
The Biden administration should invest the money as they did into the meat industry to make changes that could help independent locums practitioners contract directly rather than having to use staffing agencies. This would allow facilities to save money and pay practitioners fairly. The items to consider for the administration would be the following:
The locums industry, like the meat industry, lacks complete transparency. Much like the ranchers that have questioned the need for large meat packing companies and founded Sustainable Beef, practitioners are beginning to ask what is the actual value of working for a locums agency. Much like Walmart, which sees the importance of working directly with ranchers, facilities might begin to see the value of working directly with practitioners. Thus, saving the facilities money and paying practitioners fairly.