Meat prices and competition: Biden pledges billions

In his Jan. 3, 2022, Roundtable on Promoting Competition and Reducing Prices in the Meat Industry President Joe Biden said his plan to address meat counter costs for consumers includes fixing the supply chains, protecting consumers, and lowering kitchen table costs by keeping food costs down for consumers. Competition, he said, is the key to winning that battle.

The first part of his four-part plan, he said, is the investment of $1 billion in new and expanded meat and poultry processing capacity funded in the American Rescue Plan. Second, he seeks to strengthen the Packers and Stockyards Act, claiming the law was weakened by the Trump administration. Third, the government will enforce competition laws vigorously and fairly. He said his executive order on competition established a whole-government approach to increasing competition, along with the newly established White House Competition Council. Last, he said he will bring greater transparency to the industry.

“A free market isn’t truly free without transparency around prices,” he said.

Agriculture Secretary Vilsack said $100 million will be utilized to reduce the cost of inspections for existing small and very small processing facilities; $32 million in grants were awarded to 167 existing facilities to modernize their operations and allow them to expand their opportunities beyond state lines and create interstate opportunities; $100 million in available loan guarantees to address the middle-level supply chain challenges the industry faces like cold storage and warehousing, and allowing these sectors to expand as well.

“The announcement we make today is an $800 million commitment of grants and loans to address capacity, workforce, and innovation challenges the industry faces,” Vilsack said. “We’re going to make available, Mr. President, $375 million in grants for expanded facilities and new construction of new facilities.”

To make funds available quickly, Vilsack said $150 million of this will be made available in the spring under a Request for Proposal. The remaining $225 million will be made available in the summer. An addition $275 million will be made available to lenders to ensure more affordable loans. To address workforce, $100 million will be used to create a pipeline of well-trained workers. The remainder will be invested in innovation and technology.

He said in addition to strengthening the PSA, the USDA is also working on the voluntary label program known as “Product of the USA.”

Attorney General Merrick Garland said the Department of Justice has increased efforts over the past 10 months to ensure competition and counter anti-competitive practices across all sectors. He announced a new joint initiative to better coordinate efforts between the USDA and DOJ, including the launch of a portal to report complaints of potential violations of our competition laws, including the Sherman and Clayton Acts and the PSA. He said whistleblowers will, in many cases, be protected in cases of reported antitrust violations.

Scott Blubaugh, president of the Oklahoma Farmers Union said the ability to process food animals locally will enable farmers and ranchers to retain more of that retail food dollar at the farm gates and in rural communities.

“For too long, we have seen the multinational meat packers suck out all the wealth of rural America and put it in their corporate coffers and, in some cases, even overseas,” Blubaugh said. “We’re excited to have local processing done by local people and then sell directly to the consumer. Whether we can sell to the grocery stores or the restaurants or the consumers directly, all of theses will enable our rural communities to be lifted out of poverty.”

Blubaugh said the CARES funds allocated by the Oklahoma Department of Agriculture created opportunity for expanded and new “mom and pop” meat processors in his state.

Vilsack said rural America has long been an “extraction economy” where he said farmers and ranchers work hard raising cattle only to transport them hundreds of miles away and the profits go thousands of miles away.

“Just so you understand how dire this is, I was in Council Bluffs, Iowa, talking to a farmer this summer and he came up to me and said, ‘Mr. Secretary, thank you so much for doing this. I just sold a load of cattle, and this is what irritates me about this whole system. I lost $150 per head on these cattle but I know the processor that purchased those cattle is going to make $1,800 a head.’ He looked at me and said, ‘Mr. Secretary, how is that fair,’” Vilsack said. “It’s not.”

Blubaugh went on to say that selling cattle to the Big Four is oftentimes the only option for producers, so having the option to process the cattle locally and sell directly to consumers is a win-win for producers and consumers alike. Notably, according to a study by the University of Tennessee, only about 10% of producers retain ownership in the feedlot of their weaned calves based on delayed income, financing demands, and increased risk. Blubaugh said consumer faith in the American farmer and rancher is far greater than in any of the multinational packers.

Following the broadcast, the North American Meat Institute, the international trade association for meat and poultry packers and processors of all sizes, today criticized the plans.

“For the third time in six months, President Joe Biden and his Administration announced the same plans to spend $1 billion to fund government intervention in the market in an attempt to increase prices livestock producers receive while blaming inflation on private industry,” Julie Anna Potts, President and CEO said. “The Biden Administration continues to ignore the number one challenge to meat and poultry production: labor shortages. This tired approach is not surprising because they have refused to engage with the packing and processing sector they attack, going so far as to hold a roundtable on meat packing without a single beef or pork packer present.”

In a statement, Potts said press conferences and spending taxpayer dollars to establish government-sponsored packing and processing plants will not do anything to address the lack of labor at meat and poultry plants and spiking inflation across the economy. She went on to say the Administration wants the American people to believe that the meat and poultry industry is unique and not experiencing the same problems causing inflation across the economy, like increased input costs, increased energy costs, labor shortages and transportation challenges.

“Consumers know better,” she said.

Potts said, as economists predicted, producers are seeing higher prices for their cattle because packers have processed the backlog of animals in the system. The Biden Administration has claimed, she said, industry structure is keeping down prices cattle producers receive for their animals, conveniently ignoring the fact the beef industry has changed little for almost 30 years.  Prices reflect supply and demand in a healthy market.

On December 26, 2021, Larry Summers, Secretary of the Treasury for President Clinton, the Director of the National Economic Council for President Obama and Charles W. Eliot Professor and President Emeritus at Harvard University posted on Twitter.

“The emerging claim that antitrust can combat inflation reflects ‘science denial’. There are many areas like transitory inflation where serious economists differ. Antitrust as an anti-inflation strategy is not one of them.”

Summers also said on Twitter, “Monopoly may lead to high prices but there is no reason to expect it to lead to rising prices unless it is increasing. There is no basis whatsoever thinking that monopoly power has increased during the past year in which inflation has greatly accelerated.

“Rising demand, with capacity and labor constraints, are fully sufficient to account for what we observe in meat packing — Administration claims notwithstanding,” tweeted Summers. “Breaking up meatpacking would in the short run lead to reduced supply which would further increases prices. In general, when government goes to war with industries it discourages investment and subsequent capacity.”

According to USDA data, fed cattle prices are on the rise with fourth quarter 2021 fed cattle prices the highest in five years.

National Chicken Council President Mike Brown called the plan “a solution in search of a problem.”

North American Meat Institute spokesperson Sarah Little said staffing plants remains the biggest issue for meatpackers and that the White House plan would not address it.

“Our members of all sizes cannot operate at capacity because they struggle to employ a long-term stable workforce,” she said. “New capacity and expanded capacity created by the government will have the same problem.”

According to the NAMI, unanswered questions include the amount of packing capacity the Administration believes is necessary; what price the Administration believes cattle should bring; the length of time government sponsored processors will receive funding; how much government sponsored processors will be required to pay workers; the potential affects of an influx of government sponsored processors on the existing small and mid-size processors; the timeline for new processors to come online; which geographical areas the Administration has deemed as targets for government sponsored processors; and whether new plants will have sufficient labor.

R-CALF USA’s Bill Bullard said his group remains skeptical about the plan’s strategy for addressing decades of nonenforcement of U.S. antitrust laws and the 100-year-old Packers and Stockyards Act.

He said his organization waited for years and by 2019 it was clear the government was disinclined to protect the cattle industry from alleged packer buying practices that R-CALF USA alleged were harming America’s cattle producers in the group’s private antitrust lawsuit filed against the largest packers in April of that year.

“Our nation’s cattle industry is in a serious crisis and while we appreciate the administration’s plans to write rules with which to implement portions of the Packers and Stockyards Act, correct the exploitive “Product of USA” beef label, and increase market transparency by requiring more information, as well as its attempt to identify any new, potential violations of competition laws, the fact remains that the administration has not announced that it will take decisive enforcement action to protect America’s cattle producers from the harms they’ve been experiencing for the past seven years, and we remain disappointed with that omission,” Bullard concluded.

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