Unpacking the price-fixing concerns in the meat processing industry

Updated: Jun. 10, 2021 at 8:57 AM CDT
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WASHINGTON (Gray DC) - As summer grilling season heats up, you’ll likely notice beef prices are taking off too.

Data from the U.S Department of Agriculture and the U.S Bureau of Labor Statistics shows the price of live cattle has fallen over the last few years while the price of boxed beef has significantly increased; shrinking farmers’ share while inflating prices at the grocery store.

Sitting in-between the cattle farmers and consumers, are the meatpacking companies.

Data Analysis:

  • The average farm value of beef fell 23% since 2014, while the average wholesale value of beef remains about the same. Meanwhile, the retail value has increased around 9%.
  • The average difference between the value of meat when it leaves the farm and the value of meat when it leaves the processing plant has increased steadily since the 1970s when the USDA started collecting data. In 2010, meatpackers sold the average pound of beef for 35 cents more than what they paid a rancher for it. That price difference has since tripled, with meatpackers now charging retailers an average of $1.12 per pound more than the farm value, according to data from the first few months of this year.
  • For consumers, the average price of beef has gone up 49% since 2010.

While some of the discrepancies can be explained by the pandemic and the recent ransomware attack on JBS Foods, lawmakers say they are concerned the nation’s four largest meatpackers are causing the trend by violating antitrust laws, which prohibit deceptive trade practices such as price-gouging and market manipulation.

“Either the existing laws are not working, or if they are working, why aren’t they being enforced?” asked Sen. Mike Rounds (R-S.D.)

Sens. Mike Rounds (R-S.D.) and Tina Smith (D-Minn.) say four corporations, known as the “Big Four” (JBS SA, Cargill Meat Solutions, National Beef Packing Co., and Tyson Foods), control more than 80% of the beef processing market in the United States.

In multiple open letters to Attorney General Merrick Garland, dozens of lawmakers, including Smith and Rounds, are calling on the Department of Justice (DOJ) to investigate the leading packers for anticompetitive behavior.

“Those who are getting hurt are the independent cattle producers and also consumers,” said Sen Tina Smith (D-Minn.) “That’s what we’re asking the Department of Justice; to figure out what’s happening, and what we need to do about it.”

President Donald Trump asked the DOJ to investigate allegations that U.S. beef and pork producers were violating federal antitrust laws last spring, as supermarket prices were skyrocketing, and processing plants were shuttering due to the pandemic. Sen. John Thune (R-S. D.) says he has seen “no public results” and it’s unclear if an investigation is still underway.

In a 2020 10-K filling report to the Securities and Exchange Commission, Tyson Foods confirmed there was a DOJ inquiry last year.

A DOJ spokesperson declined to comment on the investigation.

The National Cattleman’s Beef Association trade and lobbying group is also pressuring the DOJ to provide investigative updates, even though Tyson Foods, Cargill Meat Solutions, and National Beef Packing Co. are listed as NCBA product council members.

“About 95% of our membership is made up of cow-calf producers, rank and file cattle ranchers, that are out there making their living in the business of cattle production,” said Tanner Beymer, NCBA Director of Government Affairs and Market Regulatory Policy. “NCBA is supportive of these investigations.”

The USDA issued a Boxed Beef and Fed Cattle Price Spread Investigation Report in July of 2020 surrounding price concerns brought on by the pandemic and the 2019 summer fire at the Tyson beef packing plant in Holcomb, Kansas. The report did not detail any violations of federal activity.

In January Tyson Foods, which is also a leading chicken processor, agreed to pay a $221.5 million settlement after class-action claims accused the chicken industry of purposely inflating the price of chickens sold for meat.

While the coronavirus pandemic brought many of these supply chain issues to light, Drake University Agriculture Professor Jennifer Zwagerman says these concerns date back decades.

“About 100 years ago, we really started to see a focus on this idea of concentration and market power within the meat sector,” said Zwagerman. “That’s really what the question comes down to now; are these somehow unfair and unjust practices that have led to this? Or is it just the evolution of the market?”

Zwagerman references two laws intended to prevent anticompetitive behavior; the Sherman Antitrust Act of 1890 and the Packers and Stockyard Act of 1921, which prohibit packers from participating in any “unfair, unjustly discriminatory, or deceptive trade practice or devise.”

All four companies have faced a long list of private action lawsuits, though many have been dismissed.

Several cases consolidated into one antitrust case in the U.S. District Court of the District of Minnesota, which accused the leading processing companies of conspiring to fix cattle prices, was dismissed without prejudice on September 28, 2020.

“Companies are saying ‘it’s because we don’t have workers; the pandemic slowed us down; we don’t have the capacity or the labor force.’ And you know, it’s hard to disprove some of those things right now,” said Zwagerman.

She also points to political factors such as lobbying power and the administration shift.

Lawmakers and industry officials say they are exploring other options to address these concerns.

Members of Congress aim to hold hearings on the lack of competition within the beef processing industry.

The NCBA is also advocating for a cattle contract library, which would promote market transparency by encouraging the sharing of financial information between producers, though Beymer says there isn’t likely a “simple “solution.

“There is no such thing as a one size fits all solution to address all of the concerns that are being raised,” said Tanner. “From a market transparency perspective, a lot hinges upon the publication of the Justice Department’s findings.”

Tyson and Cargill declined Gray Television’s Washington News Bureau’s request for comment. National Beef and JBS have not yet responded to our inquiry.

Grace Ferguson contributed to this report.

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