Lawmakers question beef executives over soaring food prices
The Washington Post April 28, 2022
WASHINGTON — Lawmakers on Capitol Hill aggressively questioned the chief executives of the country’s four major beef producers, accusing them of engaging in anti-competitive practices that have financially harmed cattle ranchers and driven up the price of meat.
The four multinational corporations — National Beef, JBS, Cargill and Tyson — control 85 percent of the beef industry. Allegations that these meatpackers have abused their position in a highly concentrated market to fix prices has led to $400 million in fines and settlements in recent years. Critics of the companies’ conduct also say industry consolidation has squeezed both ends of the supply chain, with ranchers being paid unsustainable prices for their cattle and consumers overpaying at the grocery store.
Defenders of the meatpacking firms say they are being scapegoated for inflation. Tyson chief executive Donnie King defended his company’s actions Wednesday, telling the House Agriculture Committee that it doesn’t set prices for either cattle or beef.
“These prices are set by straightforward market forces, namely available supply and consumer demand. These market forces mean that there are times when the commodity business cycle favors one party over another,” he said.
But lawmakers took a sharp tone with the executives in the face of rising food prices and concerns that the companies took advantage of the coronavirus. The four companies’ collective net profits rose more than 300 percent during the pandemic.
Last year, the prices for beef, pork and poultry increased far more than other kinds of food, accounting for more than half of price inflation at grocery stores. But in the past couple months other categories, such as produce, eggs and grains, have also skyrocketed.
The hearings before the House and Senate Agriculture committees related to two bills designed to provide relief for consumers and ranchers and prevent anti-competitive practices. The Meat Packing Special Investigator Act, co-sponsored by Sens. Jon Tester, D-Mont., Chuck Grassley, R-Iowa, and Mike Rounds, R-S.D., would create a new U.S. Agriculture Department office to monitor for anti-competitive practices in the meat and poultry industries. The Cattle Price Discovery and Transparency Act, co-sponsored by Grassley, Tester and Sens. Deb Fischer, R-Neb., and Ron Wyden, D-Ore., would establish minimums for negotiated sales and require clear reporting of marketing contracts to ensure ranchers are getting a fair shake in a highly consolidated cattle market.
Tester, who testified Tuesday in support of these two bipartisan bills, said that the meat industry is more consolidated today than it was a century ago and that rural America is drying up because farmers and ranchers can’t get sell their goods for fair prices.
Passage of these two bills into law will mean better prices for consumers, too, Tester said in an interview.
“Competition benefits the consumer, and right now that competition doesn’t exist,” he said. “Not only is the farmer getting [ripped off], but the consumer is, too, because the packers can set the price at both ends and make as much money as they want in the middle. You’re going to see consumers get an advantage because that competition will drive down prices.”
In a statement to The Post, Grassley said, “This issue has been around long before the spike in inflation, but the current economic and political conditions only further justify passing our bipartisan reforms.”
Not everyone is in agreement that consolidation in the industry is the problem or that these new bills can fix it.
In a letter to House Agriculture Committee leaders, the U.S. Chamber of Commerce said that “the real, underlying causes driving price increases” were coronavirus-related supply chain disruptions and increased input costs, especially higher energy and labor costs.
“Rather than blame American business, policymakers should explore other avenues to encourage competition and lower prices for consumers, including expanded energy production, tariff reduction, and regulatory relief,” 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.”
Rep. Glenn Thompson, Penn., ranking Republican of the House Agriculture Committee, said at Wednesday’s hearing that he was “very disappointed in the way this has come together,” adding that “if there has been collusion, manipulation or other wrongdoing by packers, then the law should be enforced under the existing authorities at the USDA and Department of Justice. Absent such findings, it’s time to stop demonizing the packing industry out of political convenience.”
Thompson said that at every turn, the Biden administration had erroneously pointed the finger at the meatpacking industry as being single-handedly responsible for rising food costs.
National Economic Council Director Brian Deese has drawn connections between consolidation in the meat industry and increasing prices of meat. Last year, President Joe Biden issued an executive order focused on antitrust enforcement, directly addressing meat industry consolidation. And in January, the White House offered $1 billion in aid for smaller meat-industry processors, aimed at reducing the clout of the four powerful meat companies.
Still, there is little doubt that Big Meat’s practices have adversely impacted American ranchers. Gilles Stockton, spokesman for the Northern Plains Resource Council, a Montana agriculture and conservation group, said that when he started ranching in 1975, “out of every dollar consumers spent on beef, 71.3 cents went to the ranchers or feedlots. Now that is 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 stress 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-off issue. In 2015, I was getting paid at $2.50 per pound. It’s about $1.70 now.”
Tyson’s King strongly objected to the idea of “pandemic profiteering” in his testimony, saying “we just didn’t have enough people to fully staff our plants,” which resulted in a “sudden and swift rise” in the oversupply of cattle and a corresponding drop in cattle prices. At the same time, “the price for finished beef — the beef that consumers buy at grocery stores — was rising, driven by skyrocketing consumer demand” and “basic economics holds that when demand is high and supply is low, prices will rise, which is precisely what they did.”
The House Agriculture Committee will continue to solicit feedback on both bills before it takes action on them.