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Prices for beef, pork and chicken have increased during the pandemic, and the Biden administration thinks it knows who is partly behind this: a handful of large meat packers who control most of the country’s supply. .
In August alone, wholesale meat prices soared 8.5%, making it one of the costliest items on the rising bills consumers face at the grocery store today.
“It’s just outrageous. I can’t even understand how people are supposed to be able to pay that kind of money for basic things like ground beef,” says Adam Jones, who raises Angus cattle in the North. western Kansas. “We’re not talking about filet mignon. We’re just talking about being able to make spaghetti or being able to make tacos.”
Rising meat prices helped push inflation to a nearly 13-year high. And the White House is responding by shining the spotlight on “Big Meat,” part of a larger campaign against what the Biden administration calls “anti-competitive” behavior by big business – even as meat packers insist. fact that they are not to blame.
Over 80% of beef in the United States is slaughtered and processed by just four major companies, including Tyson Foods and JBS USA. A similar handful of companies also control the processing of more than half of the country’s chicken and two-thirds of pork.
This means that farmers and ranchers have little choice in which to sell their livestock.
Jones calls himself a conservative Republican. But he welcomes the administration’s willingness to increase competition in the highly consolidated meat packaging industry.
“There was merger after merger,” Jones said. “It’s really gotten to the point where there’s no competition in our industry at all.”
The administration says industry giants like Tyson and Smithfield have such a grip on processing operations that they can charge higher prices at the supermarket, while putting pressure on farmers, who in some cases , cannot even cover their costs.
“Farmers are losing money on the cattle, pigs and poultry they sell at a time when consumers are seeing higher prices at the grocery store,” the Agriculture Secretary said last week, Tom Vilsack. “And there are now record profits or near record profits for those in the middle.
“I remember talking to a producer the other day in Council Bluffs [Iowa], and he said, ‘I don’t understand. I just sold my cattle and lost $ 150 per head. But the processor made $ 1,800 per head. How can that be? Vilsack added.
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The White House wants to open up the Big Meat industry
The administration is setting aside $ 500 million to help fund new meat processors to compete with the Big Four.
The Justice Department is also investigating alleged price fixing in the chicken market. The second-largest chicken processor, Pilgrim’s Pride, has pleaded guilty this year to conspiring with others to limit production and keep chicken prices artificially high.
But packers reject the idea that industry consolidation is hurting ranchers or consumers.
“The current price gap between live cattle and beef has everything to do with the law of supply and demand,” said Shane Miller, president of the Fresh Meats group at Tyson, the world’s largest beef processor. and local chicken.
Miller told a Senate committee this summer that the pandemic and other shocks have forced processors to slow down their slaughter operations, so there are fewer cattle coming in and fewer steaks coming out.
“This has led to an oversupply of live cattle and an insufficient supply of beef, as demand for beef products hits an all-time high,” Miller said. “So it should come as no surprise to any of us that as a result the price of cattle has gone down while the price of beef has gone up.”
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Put an end to the sticker shock at the butcher’s counter
Meat packers claim that their giant size normally makes them more efficient and helps keep prices for consumers down.
Over the past decades, this “consumer welfare” argument has gained much weight. Government regulators were willing to accept one merger after another, as long as the burger was cheap.
But a new generation of antitrust academics – and the Biden administration – are more skeptical of the power of big business.
“Between these recent price shocks in the pandemic and the ongoing pricing allegations, that [consumer welfare] the argument for consolidation is collapsing, “said Claire Kelloway, a researcher at the Open Markets Institute, an anti-monopoly think tank.” There is growing evidence and suspicion that this power market has gone too far and is starting to hurt consumers. ”
A ransomware attack on JBS in June that temporarily slowed down nearly a quarter of the company’s beef processing capacity also highlighted the risk of having much of the country’s food supply. in the hands of a few large companies.
Almost exactly a century ago, the federal government passed the “Packers and Stockyards Act” to curb the excesses of what was then known as the “Meat Trust”.
The Biden administration promises stronger enforcement of this 1921 law. And it may find new support from buyers, faced with the shock of stickers at the butcher’s counter.