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Thursday, October 28, 2021

Biden v Big Meat: Can the US tackle rising beef prices?

IDBS ART GALLERY

It is a typically bustling day in “Little India”, a part of Queens in New York City that many South Asian immigrants call home. But things are much quieter at the Al Noor Meat Market, a local halal butchers on 73rd Street.

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

According to Shakeel Anjum, 36, a butcher at the shop, the wholesale price of goat meat has risen from around $8 to $10 per pound, while beef has risen from $5 to $6.

“People eat less when meat is expensive,” he says, adding that the shop has raised its own prices to compensate. “Business is sluggish.”

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

Al Noor’s is paying 15% more for its chicken at the moment

From cars to clothing, the cost of living in the United States has risen since the economy reopened. However, average meat prices have risen unusually sharply, with beef up 14 percent since December 2020, pork up 12.1%, and poultry up 6.6%.

Consumers are increasingly concerned about rising grocery bills, and the White House has vowed to act. Part of the problem, it says, is a that a few big meat processing companies dominate US supply, allowing them to charge what they like.

In an executive order in July, the president pledged $500m in federal loans and grants to help new meat processors enter the market and compete with the big players, in an attempt to bring down prices.

The administration is investigating “price-fixing” in the chicken-processing industry (which has already led to a $107m fine for Pilgrim’s Pride, a Colorado based supplier). And it plans to tighten the laws governing competition in the meat industry.

Yet the major processors say the administration is “scapegoating” them and has misunderstood the “fundamentals” of the market.

What’s the beef about?

Concerns about meat prices are nothing new in the United States. President Woodrow Wilson enacted the Packers and Stockyards Act (which is still in effect today) in 1921 to rein in large meat processors who were similarly accused of price control.

As the cost of living rose, President Richard Nixon imposed price ceilings on beef, pork, and lamb in 1973.

These moves were met with limited success, and the meat processing industry has become highly consolidated since the 1980s as regulators struggled to keep up with a fast-changing industry.

Depending on the meat, only four companies – JBS, Cargill Meat Solutions, Tyson Foods, and National Beef Packing Co – control between 55% and 85% of the market. In the 1970s and 1980s, the four largest packing companies controlled only 25-35 percent of the market.

According to the White House, this gives them too much power over not only what they charge retailers and restaurants, but also what they pay farmers for livestock.

It has reached a boiling point during the pandemic, with consumer demand for meat reaching all-time highs as a result of people stockpiling or splashing out. Wholesale meat prices have risen, while livestock and poultry prices have fallen, leaving some farmers unable to make a profit.

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

“We’ve had concentration without oversight [in the processing industry] since the 1980s, and that’s a problem,” says Joshua Specht, an environmental historian at Indiana’s Notre Dame University. “Meatpackers are capturing an increasing share of the US food dollar.”

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The industry adamantly denies the claims, saying the price rises are not due to consolidation. Instead it blames pandemic-related supply chain issues, including an “acute” labour shortage which led to plant closures last year.

“Multiple, unprecedented market shocks, including a global pandemic and severe weather conditions, led to an unexpected and drastic drop in meat processors’ abilities to operate at full capacity,” Tyson Foods said in a statement last month.

“This led to an oversupply of live cattle and an undersupply of beef, while demand for beef products was at an all-time high. So, as a result, the price for cattle fell, while the price for beef rose. Today, prices paid to cattle producers are rising.”

Brett Kenzy runs a cattle ranch in South Dakota

Ranchers like Brett Kenzy are sceptical. He believes there are simply not enough processing companies out there to buy his cattle, forcing him to accept the one and only bid he receives. Like others, he suspects the “Big Meat” industry tries to keep it that way on purpose – claims the processors deny.

The farmer, who raises over 3,000 cattle in South Dakota, applauds the Biden administration’s plans to increase competition in the industry. Since 2015, he claims, the trend of “cheap cattle and expensive beef” has harmed his ranch.

“It’s been really difficult,” he says. “In recent years, we’ve seen some blips of profitability, but also some massive losses. We’re barely keeping afloat.”

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

“I have to remain hopeful we can find a solution,” he says.

R-Calf USA, an organisation that represents independent cattle farmers, has filed a lawsuit against the big four meat processors, accusing them of conspiring to suppress cattle prices in order to increase their profits. Tyson called the allegations “baseless,” while Cargill said they were “without merit.”

According to R-Calf USA, pricing issues are hastening the closure of cattle farms across the United States, with approximately 17,000 farms closing each year because they are not profitable enough.

“It’s hollowing out our rural communities and making recovery from Covid difficult,” says CEO Bill Bullford.

A meat processing plant in California

Will Biden’s plans work?

The Biden administration is carrying out its plans. It announced in September that it would provide $1.4 billion in additional aid to small producers, processors, distributors, farmers markets, seafood processors, and food and farm workers affected by Covid or extreme weather in order to strengthen the US food supply chain.

It has also begun to collaborate with Congress to improve transparency in cattle prices.

However, some commentators are sceptical of the plans, warning that smaller meat processors will never be able to compete with giants that can outspend them. The $500 million set aside to fund new market entrants is also unlikely to go far without additional private investment.

Glynn Tonsor, an agricultural economist at Kansas State University, adds that “multiple factors,” not just consolidation, influence meat prices over time. He believes that current high prices will gradually decline on their own.

Nonetheless, Josh Specht applauds the administration’s intervention, stating that it is looking for a “new approach” to an age-old problem.

“Ranchers have been complaining about this for 100 years, and now consumers are suffering as a result, pushing it higher up the political agenda.

“It will take time for the administration to change an enormously powerful industry and an enormously important part of the US economy.”

Mr Kenzy believes the administration is on the right track, but he hopes it will follow through.

“No one will be able to compete unless we confront the consolidated power of the meat packers. We must either mandate a minimum level of competition or exercise our rights under anti-trust laws.

“If that means splintering them, so be it.”

SourceBBC
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