In an unremarkable brown building with 1970s interior decor, nestled between a gas station and a Moose Lodge, Kim Ulmer and two of his employees were making quick work of a steer.

The animal was led through a chute into the room at US Beef Producers where it would spend the last few minutes of its life. Less than an hour later, stripped of its head, hide and innards as country music played, it would become two sides of beef.

Ulmer and about a dozen other investors bought and reopened the shuttered meatpacking plant in Fort Pierre, South Dakota, in 2020. Upset that local cattle ranchers had to send animals hundreds of miles away to be slaughtered before being sent back to Fort Pierre-area stores and restaurants, they hoped to provide a local option. Nearly two years later, they’re still trying to get certified by the state, but have been held back by what they say are unreasonable requirements. At the moment they are only able to slaughter a handful of cows a week and are required to return the meat to the owner rather than sell it to retailers, which has made the facility’s future uncertain.

Finding a viable situation is not easy, with thousands of cattle ranchers and independent slaughterhouses across the United States stuck in a beef-production system dominated by four huge companies.

“If I had an account with [local grocery chain] Lynn’s Dakotamart for six a week, I could kill six a week,” Ulmer said as he tried to scrub beef blood from his pants at the plant just across the Missouri River from Pierre, the state capital. “But you can’t kill without a destination.”

The conglomerates – JBS, Cargill, Tyson Foods and National Beef Packing – control about 85% of the beef industry’s processing capacity. That imbalance, experts say, has made it more difficult for ranchers to get a fair price for their cattle and for independent processors to stay in business, even though meat prices have risen sharply during the pandemic.

At the consumer end of the chain, beef and veal have gone up 16% in the last year, according to the latest figures from the Department of Labor, while food prices overall have gone up 7%.

Joe Biden has announced a focus on righting the lopsided industry. In January he pledged $1bn to expand meat and poultry processing with the aim of helping independent processors like Ulmer compete with the big four companies, as well as expanding choice and lowering prices for consumers. It’s part of a wider move by Biden to blame some corporations for high prices as the president faces inflation at its highest level in 40 years.

And after decades of failed attempts to better regulate competition in the meat industry, Congress has recently tried to make progress. A bipartisan bill introduced last year by Chuck Grassley, a Republican senator from Iowa, would require meatpackers to buy a certain amount of livestock from independent ranchers, and a second bipartisan bill would create a special office to investigate anticompetitive activities.

“You have these big packers lobbying hard against the independent producer,” Grassley said. “They’re screwing the consumer. They’re screwing the cattle producers.”

Representatives of JBS and National Beef Packing did not respond to interview requests. Cargill and Tyson representatives declined to answer questions.

As the Biden policy to boost independent meat processors was unveiled, the White House press secretary, Jen Psaki, tweeted a graphic that compared wholesale beef prices and cattle values.

Industry analysts have broadly welcomed the Biden administration’s move, though there is disagreement about how much, and how quickly, it is likely to affect prices for consumers and ranchers, and whether it can amount to any meaningful reduction of consolidation without bolder antitrust moves.

It is, however, a positive sign for Ulmer and smaller-scale meatpackers hoping to expand in a system that has arguably not been working very well for anyone except the giant firms.

How a cow becomes a burger

It can be difficult to follow how a steer becomes a hamburger and consolidation within the meat industry has made that process even more opaque.

Essentially, a cattle ranch that doesn’t raise animals itself sells young cattle to a feedlot, where they are fed until they’re ready for slaughter. A processor, or slaughterhouse, buys the animals, kills them and turns them into steaks, hamburgers and other cuts of meat. The meat is then sold to grocery stores, restaurants, schools, prisons and other institutions to feed to consumers.

The problem with consolidation of meat processors is that large swaths of the country have no slaughterhouses left, meaning live cows must be trucked hundreds of miles to a plant and then the meat trucked hundreds of miles back to that same town. Farmers and independent slaughterhouses say it’s difficult to wedge their way into the process, which they claim is riddled with secret contracts that make it impossible to figure out the real price of beef.

Retail beef prices spiked early in the pandemic as meatpacking plants were beset by coronavirus infections, with ground chuck soaring to $5.33 (£3.92) a pound in June 2020 compared to $3.95 (£2.91) the previous June, according to the Bureau of Labor Statistics. The price has since declined to $4.77 (£3.51). Farmers receive about 39% of the retail price of the cattle they raise, said USDA economist William Hahn, noting that figure fluctuates higher and lower over time.

Federal regulators and Congress need to recognize that significant portions of livestock-related laws were written in the 1800s and need updating, said Thomas Tomich, a professor of sustainability science and policy at the University of California at Davis who co-authored a 2021 paper on the effects of industry consolidation on California ranchers and processors.

The pandemic, which crippled supply as demand for meat spiked, helped focus attention on the effects of consolidation, he said. “It’s great to see the federal government give attention to this in a way we haven’t seen maybe in my lifetime,” Tomich said. “The pandemic is a terrible thing, but the silver lining is that it has revealed some things in our food system that have been developing for decades.”

For smaller-scale ranchers like Molly Watkins, who owns a farm in Linden, California, the loss of local slaughterhouses means she and her husband must drive farther than ever to sell a cow, all for a low price that makes it hardly worth the effort.

The auction system, which ensures transparent prices in the cattle industry, has fallen apart as meatpackers have come to rely more on fixed-price contracts, she said. “We got nothing for one of the cows,” said Watkins, who did not understand why.

“Somebody got her and ground her up and ate her, but we as growers got nothing. To get absolutely nothing for an animal you grew and brought into town yourself? That’s the world we live in right now.”

Nearby ranchers have had the same problems, she said, meaning sales of hay, which she also grows on the farm, have dropped steadily in recent years.

Big meat processors say through industry organizations they’re not responsible for the changes experienced by Watkins and thousands of others. Sarah Little, vice-president of communications for the North American Meat Institute, which represents slaughterhouses and packers, said supply and demand and other factors were behind the recent turmoil.

Four companies have dominated the industry for 30 years and consolidation has been good for the meat industry, she said, helping companies weather the pandemic, labor shortages and drought. “It’s economies of scale and it’s allowed the industry to be more sustainable,” Little said. “We produce more meat from fewer cattle.”

But some economists argue consolidation has created a lack of transparency that makes it difficult to pin down why consumers are paying exorbitant prices for beef and farmers are making so little. The federal government has failed for 30 years to enforce antitrust laws, economists say, which is one reason steaks cost so much.

“Monopoly is a sign of market failure,” said David Anderson, an economist with the Texas A&M University AgriLife Extension. “While we have a pretty free and competitive marketplace, we have some rules of the road. We have an antitrust act, which should enable the justice department to investigate.”

Nevertheless, a 2021 report commissioned by Congress and written by Anderson and two other Texas A&M economists concluded consolidation among meatpackers had not affected beef prices much. “Research indicates that there is market power, but its effect has been small,” the report noted.

Modernization

Regardless of the root causes of the problems, several in the industry said the upcoming federal investment would help smaller slaughterhouses gain all-important federal certification, which allows plants to sell meat to consumers. Plants must have modern equipment and a US Department of Agriculture inspector onsite to be certified.

“The USDA-inspected plants are just a lot more complicated and a lot more expensive to build and maintain,” said John Hansen, president of the Nebraska Farmers Union since 1989. “We hope we will get some new plants started and we hope we will get some of the plants we already have modernized.”

Modern slaughterhouses are more desirable to cattle producers because they’re more likely to ensure humane treatment and quick kills, said Bill Niman, founder of the Niman Ranch meat company, a ubiquitous brand among San Francisco Bay area restaurants.

“Even though we support small livestock operations from farm to plate, when it comes to meat quality and safety these larger consolidated operations are better than the smaller plants,” said Niman, who left his namesake company in 2007 and now sells animals from his home farm north of San Francisco to a local meat brand. “It’s hard to retrofit an old plant to address all animal welfare concerns.”

Among those working to modernize plants is Gary Hendrix of Baird, Texas. He spent a decade gathering investors to start NSC Beef Processing (the acronym stands for No Spinal Cord), which opened a slaughterhouse two years ago to test and showcase new technology Hendrix says will cut labor costs by 30%.

The goal is to help rural communities open smaller slaughterhouses to help local ranchers and retailers compete in the difficult market, he said. Antitrust actions would be helpful, Hendrix said, and would attract smaller operators to the industry.

“I don’t think you’re going to reduce the size of those companies until you get more players in the industry,” he said. “It’s kind of like trying to umpire a baseball game from outside the stadium. You’ve got to get in the game to affect the outcome.”

Back at US Beef Producers in Fort Pierre, which plans to apply for a portion of the new federal money to install new equipment, employee Daniel Bennett relaxes after finishing a slaughter, flecks of cow flesh and bone covering his face, hair and clothes. Anyone who eats beef should understand how the industry works, he said.

“You go to Burger King and get a Whopper, but you don’t consider where the meat comes from,” said Bennett, who worked at the fast-food chain before he was hired by the slaughterhouse last year. “I mean, you know. You just don’t think about it.”