Biden Tackles Meat Price Hike

It’s a typical busy day in “Little India,” a neighborhood in Queens that many South Asian immigrants call home. However, the Al Noor Meat Market, a local halal butcher on 73rd Street, is considerably calmer.

It’s not Covid that’s driving customers away, but the rising cost of beef in the United States.

The wholesale cost of goat meat has risen from approximately $8 to $10 a pound, according to Shakeel Anjum, 36, a butcher at the business, while beef has risen from $5 to $6.

“People eat less when meat is costly,” he adds, adding that the supermarket has raised its own pricing to adapt. “Things are moving slowly.”

Big suppliers, according to his coworker Raza Jawed, 50, are to blame. “They’ve banded together and raised their rates,” he explains. “We can’t do anything since they have complete control.”

Since the economy reopened, the cost of living has risen for US consumers across the board, from automobiles to apparel. However, average meat costs have risen particularly dramatically, with beef up 14 percent, pork up 12.1 percent, and chicken up 6.6 percent since December 2020.

Consumers are becoming increasingly upset about rising supermarket costs, and the White House has promised to intervene. It claims that part of the problem is because a few large meat processing businesses control the US supply, allowing them to charge whatever they want.

In July, the president signed an executive order promising $500 million in federal loans and grants to assist new meat processors enter the market and compete with the large companies, lowering costs.

The government is looking into “price-fixing” in the chicken-processing business (which has already resulted in a $107 million punishment for Colorado-based supplier Pilgrim’s Pride). It also intends to strengthen competition regulations in the beef business.

However, the big processors claim that the government is “scapegoating” them and has misread the market’s “fundamentals.”

Whats The Core Issue?

Concerns about rising meat prices are nothing new in the United States. President Woodrow Wilson signed the Packers and Stockyards Act (which is still in effect today) in 1921 to reign in large meat producers who were also accused of pricing control.

As the cost of living rose, President Richard Nixon placed price restrictions on beef, pig, and lamb in 1973.

These efforts were mostly ineffective, and the meat processing sector has grown increasingly concentrated since the 1980s as authorities tried to keep up with a rapidly evolving industry.

Depending on the meat, JBS, Cargill Meat Solutions, Tyson Foods, and National Beef Packing Co control between 55 percent and 85 percent of the market. Only 25-35 percent of the market was dominated by the four major packing companies in the 1970s and 1980s.

The White House claims that this gives them too much influence over not just what they charge shops and restaurants, but also what they pay cattle producers.

It came to a head during the epidemic, when consumer demand for beef reached new highs as a result of individuals hoarding or splurging. Wholesale meat prices increased, but cattle and poultry prices decreased, causing some farmers to lose money.

Meanwhile, the largest processors have posted record profits and margins, prompting the White House to accuse them of “pandemic profiteering.”

“We’ve got concentration without supervision [in the processing sector] since the 1980s, and that’s a concern,” says Joshua Specht, a Notre Dame University environmental historian. “Meatpackers are grabbing a larger and larger share of the US food dollar.”

The industry vehemently refutes the allegations, claiming that price increases are not the result of consolidation. Instead, it cites pandemic-related supply chain difficulties, including as a “acute” labor shortage that forced the shutdown of plants last year.

Tyson Foods stated in a statement last month that “several, unprecedented market shocks, including a global pandemic and extreme weather conditions, led to an unanticipated and dramatic reduction in meat processors’ capacities to function at full capacity.”

“This resulted in an excess of live cattle and a shortage of meat, despite record-high demand for beef products. As a result, the price of cattle has decreased, but the price of meat has increased. Cattle farmers are now being paid higher prices.”

Ranchers such as Brett Kenzy are skeptical. He believes that there are just not enough processing companies willing to acquire his cattle, forcing him to accept the one and only offer he receives. He, like others, believes the “Big Meat” business is trying to maintain it that way on purpose – an allegation the processors dispute.

The South Dakota farmer, who raises over 3,000 cattle, applauds the Biden administration’s efforts to make the industry more competitive. Since 2015, he claims, the trend of “cheap livestock and costly meat” has harmed his ranch.

“It’s been really difficult,” he adds. “In recent years, we’ve seen some blips of success, but also some massive losses. We’re barely keeping our heads above water.”

The 49-year-old, like many others, has considered selling his business, but his stubbornness prevents him. His family has owned the ranch for four generations, and he wants to pass it down to his children.

“I have to keep hoping that we’ll be able to find a solution,” he adds.

The major four meat processors are being sued by R-Calf USA, an organization that represents independent cattle producers, for colluding to depress cow prices in order to enhance their profits. Cargill claimed the accusations “lacked validity,” while Tyson labeled them “baseless.”

According to R-Calf USA, price issues are hastening the demise of cattle ranches across the United States, with an estimated 17,000 farms closing each year because they aren’t lucrative enough.

“It’s hollowing out our rural areas and making it difficult to recover from Covid,” says Bill Bullford, the company’s CEO.

Will Biden’s Approach Work?

The plans of the Biden administration are moving forward. To make the US food supply system more robust, it said in September that it will provide $1.4 billion in extra help to small producers, processors, wholesalers, farmers markets, seafood processors, and food and agricultural employees impacted by Covid or extreme weather.

It has also started working with Congress to increase cattle pricing transparency.

However, other observers are skeptical of the ideas, claiming that smaller meat producers would never be able to compete with megacorporations who can outspend them. Without further private investment, the $500 million set aside to fund new market entrants is unlikely to go far.

Glynn Tonsor, an agricultural economist at Kansas State University, points out that “many elements,” not only consolidation, influence meat pricing over time. He believes that the current high prices will gradually decline on their own.

Josh Specht, on the other hand, applauds the administration’s action, claiming that it is looking for “a new solution” to an age-old problem.

“Ranchers have been moaning about this for a century, and now consumers are paying the price, which has pushed it to the top of the political agenda.”

“The government is attempting to transform a really powerful sector and a hugely significant component of the US economy, and it will take time.”

Mr. Kenzy believes the government is on the right road as well; all he asks is that it follow through.

“No one will be able to compete until we fight the meat packers’ concentrated power.” Either we have to legislate a minimum amount of competition, or we have to utilize our antitrust rights.

“It’s okay if that means breaking them up.”

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