Congress holds hearings on beef prices as food costs soar

Placeholder while loading article actions

Capitol Hill lawmakers have aggressively questioned the chief executives of the nation’s four largest beef producers, accusing them of engaging in anti-competitive practices that have hurt cattle producers financially and driven up the price of meat.

The four multinationals – National Beef, JBS, Cargill and Tyson – control 85% of the beef industry. Allegations that these meatpackers abused their position in a highly concentrated market to fix prices led to $400 million in fines and settlements during the last years. Critics of corporate conduct also say industry consolidation has compressed both ends of the supply chain, with ranchers being paid unsustainable prices for their livestock and consumers paying too much at the grocery store.

Defenders of meatpacking companies say they are the scapegoats of inflation. Tyson General Manager Donnie King defended his company’s actions Wednesday, telling the House Agriculture Committee that he does not fix the price of cattle or beef.

“These prices are set by direct market forces, namely available supply and consumer demand. These market forces mean that there are times when the commodity economic cycle favors one party over another,” he said.

But lawmakers have struck a sharp tone with leaders over rising food prices and fears that businesses are profiting from the coronavirus. The collective net profits of the four companies increased by more than 300 percent during the pandemic.

Last year, prices for beef, pork and poultry rose far more than other types of food, accounting for more than half of price inflation at grocery stores. But over the past two months, other categories, such as produce, eggs and cereals, have also exploded.

Four hidden reasons why food prices are crazy right now

Hearings before the House and Senate Agriculture Committees focused on two bills aimed at providing relief to consumers and ranchers and preventing anti-competitive practices. The Meat Packing Special Investigator Act, co-sponsored by Sens. Jon Tester (D-Mont.), Charles E. Grassley (R-Iowa) and Mike Rounds (RS.D.), would create a new U.S. Department of Agriculture office to monitor anticompetitive practices in the meat and poultry industries . The Cattle Price Discovery and Transparency Act, co-sponsored by Grassley, Tester and Sense. Deb Fischer (R-Neb.) and Ron Wyden, D-Ore., would set minimums for negotiated sales and require clear reporting on marketing contracts to ensure ranchers are fairly shaken up in a highly consolidated livestock market.

Tester, who testified Tuesday in support of those two bipartisan bills, said the meat industry is more consolidated today than it was a century ago and that America countryside is drying up because farmers and herders cannot sell their products at fair prices.

Passage of these two bills will also mean better prices for consumers, Tester said in an interview.

“Competition benefits the consumer, and right now that competition doesn’t exist,” he said. “Not only does the farmer get [ripped off], but so is the consumer, because packers can set the price at both ends and make as much money as they want in the middle. You are going to see consumers gaining an advantage as this competition will drive prices down.

As meat prices continue to rise, Biden administration takes aim at Big Chicken

Not everyone agrees that consolidation in the industry is the problem or that these new bills can solve it.

In a letter to the leadership of the House Agriculture Committee, the U.S. Chamber of Commerce said “the real underlying causes driving the price increases” were coronavirus-related supply chain disruptions and rising input costs, in particular rising energy and labor costs.

“Rather than blaming American companies, policymakers should explore other avenues to encourage competition and lower prices for consumers, including increasing energy production, lowering tariffs and alleviating regulation,” executive vice president Neil Bradley said in an interview. “And they should keep in mind that monetary policy is the best tool to fight inflation.”

Even in the Face of Soaring Grocery Prices, Retail Beef and Pork Prices Cause Sticker Shock

Rep. Glenn Thompson (Penn.), a top-ranking Republican on the House Agriculture Committee, said during Wednesday’s hearing that he was “very disappointed with how this went down,” adding that “if there has been collusion, manipulation or other wrongdoing by packagers, the law should be enforced under existing USDA and Department of Justice authorities. In the absence of such findings, it is time to stop demonizing the packaging industry for political convenience.

Thompson said that at every turn, the Biden administration has wrongly singled out the meatpacking industry as solely responsible for rising food costs.

Director of the National Economic Council Brian Deese has attracted links between meat industry consolidation and rising meat prices. Last year, President Biden issued a Executive Decree concentrate on antitrust enforcement, dealing directly with the consolidation of the meat industry. And in January, the White House offered $1 billion in aid to small meat processors, aimed at reducing the weight of the four powerful meat companies.

In latest effort to combat rising prices, White House to offer $1 billion in aid to small-scale meat industry producers

Yet there is no doubt that Big Meat’s practices have had a negative impact on American ranchers. Gilles Stockton, spokesman for the Northern Plains Resource Council, an agriculture and conservation group in Montana, said that when he began ranching in 1975, “out of every dollar consumers spent on beef, 71.3 cents went to breeders or feedlots, now it’s 36.4 cents.

He said the pandemic was an opportunity for the “beef-packing cartel” to take advantage and pay less for cattle.

“They were using the excuse that their packing plants were under pressure and not at full capacity because their workers were sick,” he said. “At the same time, there was a huge demand for beef, so prices skyrocketed. But this is not a one-time problem. In 2015, I was paid $2.50 a pound. It’s about $1.70 now.

Go it alone in two of America’s farm towns

Tyson’s King strongly opposed the idea of ​​’pandemic profits’ in testimony, saying that ‘we just didn’t have enough staff to fully staff our factories’ resulting in a ‘sudden and rapid increase ” from the oversupply of cattle and a corresponding decline in cattle prices. At the same time, “the price of finished beef – the beef that consumers buy from grocery stores – was rising, driven by skyrocketing consumer demand” and “basic economics argues that when demand is high and supply is low, prices will rise, which is precisely what they have done.

The House Agriculture Committee will continue to seek comment on both bills before taking action on them.

Edward N. Arrington