As Meat Industry Consolidation Sends Grocery Bills Skyrocketing, Washington Eyes Beefing Up Anti-Competition Rules

Nobody was physically injured when an August 2019 fire broke out at a Tyson Foods’-owned beef packing plant in Holcomb, Kansas, but plenty of wallets were.

The resulting four-month shutdown of the country’s second-largest beef packing plant, which was responsible for roughly 6% of the country’s total beef slaughter at the time, triggered wholesale beef prices to rise 10%, harming restaurant chains, grocery stores, and individual consumers shopping in the meat aisle.

The result of decades of consolidation in meat production, one single fire could have such an impact on beef prices. According to the 2019 Open Markets Institute report, almost 17,000 cattle ranchers went out of business every year since 1980. This is according to an anti-monopoly think tank. According to the report, while 90% of U.S.-produced hogs were exported into the competitive market in the middle-1990s (which was close to 90% at the time), the percentage had fallen below 7% by 2019. The beef market is controlled by four giant meatpackers, five poultry markets are owned by four companies, and 70% of the market for hog processing.
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Although the Holcomb fire brought meat market consolidation to consumers’ attention as rising prices led to increased awareness, the issue has been exposed repeatedly in the three years since. When there are so few meat processors, one-off emergencies—like ransomware attacks or pandemic outbreaks—at even a few meat processing factories can vastly reduce the amount of animals that can be turned into consumable meat across the nation. In the early days of the pandemic, for example, the number of pigs that could be processed declined by 45% as COVID-19 spread through the factories’ assembly lines. Pork breeders had to “liquidate” perfectly healthy pigs that they could no longer afford to feed and had no alternative meat processors on which to unload them. Customers couldn’t find their usual selections of protein in grocery stores, or began paying far more money for them.

Over hundreds of miles from Iowa’s meat processing plants and cattle farms, Washington, D.C. officials are now debating how to protect the meat sector. An uncommon bipartisan coalition within Congress seeks to increase anti-competition protections, as common goods inflation rises and smaller farmers and producers are forced to close their doors.

The coronavirus pandemic showed “how efficient the supply chain is [under normal circumstances]However, [also] how un-resilient it is,” says a Republican Senate aide granted anonymity to speak candidly about reform efforts, which include a new piece of legislation as well as enhanced enforcement of an existing law. “On everybody’s mind is, how did we get here? And what can we do to fix it?”

Customers have seen major price increases due to reduced competition. According to the White House, meat sales make up half of all price hikes seen at supermarket checkout lines. In September 2021, the White House stated that beef prices rose 14% over nine months while pork and poultry saw increases of 12% and 7% respectively. Meanwhile, the firms responsible for the market concentration hurting both farmers and consumers were treated to a profit feast due to constrained supply: Data analyzed by the White House in December reveal that the gross profits of four of the largest meat processing firms—Tyson, JBS, Marfrig, and Seaboard—collectively increased by more than 120% since before the pandemic, while their collective net income swelled by 500%.

“It’s in their best interest to exploit these market structures. It’s in their best interest to lower their labor costs and lobby the government to get favorable food processing and safety laws,” says Claire Kelloway, program manager for fair food and farming systems at the Open Markets Institute. “It’s not in their best interest to invest in distributed and resilient processing, which is what a people are calling for now after seeing how these large consolidated plants failed and buckled in the face of unexpected shock.”

Continue reading: U.S. Foods Prices are Up Why are Food Corporations Taking Advantage of the Situation?

Congress would like to force them to try, with two important bipartisan bills in development. Republican senators crafted the Cattle Price Discovery and Transparency Act. Chuck Grassley, Deb Fischer, and Ron Wyden, all Republican Senators, will create fair standards for the highly concentrated cattle market. It would accomplish this by establishing regional mandatory minimum thresholds for the proportion of cattle that meat packers have to purchase from cattle farms under set guidelines, so ranchers aren’t left burdened with too much supply and nowhere to unload it. The bill, among other things, would require that the United States Department of Agriculture (USDA), create and maintain an openly accessible library of marketing agreements. It includes information on the terms and duration of these contracts between meatpackers and producers.

Senate Republican aides say they are working with the Chair of the Senate Committee on Agriculture, Nutrition, and Forestry, Democrat Sen. Debbie Stabenow of Michigan, on some “slight technical corrections, so that USDA is able to implement it easier.” After that, the bill would go through the markup process where it could be debated or amended before coming up for a vote. These types of bills are usually packaged as a broad, omnibus piece of legislation. A potential example of such a vehicle is the next farm bill. The industry hopes it will pass before the 2018 farm law expires.

Cora Fox, the director of government relations at the Iowa Cattlemen’s Association, says the fixes couldn’t come soon enough. Many farmers in her trade group only have one or two buyers to their cattle which causes prices to remain artificially low. “We are at at the point where we have weathered too many market disruptions,” Fox says. “I know that this will affect the number of independent cattle feeders that we have long term.”

A Black Angus Cattle Ranch Amid Meat Shortages
Photographer: Dan Brouillette/Bloomberg via Getty ImagesFinance LPOn Sunday, May 3rd 2020, a bull stood at Hinton, Iowa (USA). Covid-19 has been ravaging America’s middlelands and is slowing down plants that produce large amounts of pork and beef. Already, prices are rising.

Pork and poultry producers wouldn’t benefit from this bill, however. Its not because there aren’t problems in those sectors, but because “chicken and pork” are “too far gone,” says the GOP Senate aide, citing how vertically integrated these portions of the market are, where the large companies own and control multiple stages of production, from the hatcheries to the chicken feed mills to the slaughterhouses and marketing. “They’re too far consolidated,” says the aide. “There’s not really any turning back.”

Continue reading: The Cow That Can Feed the Planet

A bill could have major implications for the entire meat industry. After the Holcomb fire took a major beef plant out of operation for months and COVID-19 shuttered various meat packing plants across the country for days at a time, a Memorial Day 2021 ransomware attack brought cattle slaughtering at all U.S. plants of JBS, the world’s largest meat company by sales, to a halt for a day over one of the most popular grilling weekends of the year. The Wall Street Journal reported that prices for boneless pork butts increased 25%. Journal. Once again, hog farmers were left with hungry pigs who were to be sent off to the meat processors.

JBS, responsible for producing roughly one-fifth of the nation’s meat supply, paid $11 million in ransom to shield the company’s customers from further interruptions. However, Democratic Senator Tester and GOP senators. Grassley and Mike Rounds, of South Dakota, argued the interlude showed how dangerous industry consolidation can be to the country’s food supply. They Introduced a bill that would allow a USDA special investigator to be granted subpoena powers to work with the Department of Justice, Federal Trade Commission and Department of Homeland Security in order to enforce laws more effectivelyThe 1921 Packers and Stockyards Act carries severe penalties for businesses that violate anti-competitive rules. “A single cyber attack that threatens the very food we eat is proof that something must be done, and fast,” Tester said in June when the legislation was announced.

Rounds and Tester live in agricultural centers. However, Big Meat also attracts the attention of lawmakers from other flyover states. On Feb. 16, Sen. Elizabeth Warren, a Massachusetts Democrat, and Rep. Mondaire Jones, a New York Democrat, authored a letter to the DOJ asking it to “scrutinize” a proposed $4.5 billion merger between Sanderson Farms and Wayne Farms, the country’s third- and sixth-largest poultry-processing companies, by Cargill Inc. and Continental Grain Co. “This proposed mega merger raises significant antitrust concerns in an industry already marked by price fixing, labor violations, and intense consolidation,” the lawmakers wrote.

While the Holcomb fire might have died out in 2019, Congress is intensifying its efforts to keep such an event from having a significant impact on the meat industry.


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