Meatpacking Industry Consolidation Must Be Investigated
Wed, 06/10/2020 - 2:10pm admin
Eric Bohl, Director of Public Affairs and Advocacy for Missouri Farm Bureau
America's meat industry has consolidated dramatically in recent decades. Missouri Farm Bureau and many farmer and consumer advocates are calling for investigations into the industry. A reliable and affordable meat supply is important, and market consolidation can harm both of these goals.
Today, four companies process over 80 percent of American beef. Three companies control 63 percent of the nation's hog processing. Five companies control more than 60 percent of the chicken market, led by northwest Arkansas-based Tyson Foods. Tyson operates six poultry processing facilities in Missouri and 10 in Arkansas.
Consolidation itself is not necessarily bad. The problems arise when these companies use their size and market power to hurt consumers and farmers. Unfortunately, several recent events have fed suspicion toward the big meatpackers.
Last summer, a fire at a cattle processing plant in Holcomb, Kansas, roiled the market. The Tyson-owned facility, the second-largest plant in the country, was out of operation for four months.
Tyson was able to immediately shift almost all production to other locations. Less than a month after the fire, its CEO said that the only losses Tyson experienced were related to the cost of transporting cattle to other plants.
Despite Tyson's resiliency, the prices packers paid farmers for live cattle plummeted in the aftermath of the fire. At the same time, consumer prices for beef shot up. Margins per animal for the meatpackers rose to their highest level in recent memory.
Many farmers cried foul. They argued that the industry's lack of competition let packers use the Holcomb fire as an excuse to raise prices for finished cuts while shortchanging farmers for their live animals.
After a nationwide uproar, U.S. Department of Agriculture Secretary Sonny Perdue announced he would investigate. Missouri livestock producers and Missouri Farm Bureau applauded this announcement. Unfortunately the investigation has yet to yield any results.
Fast forward to 2020. In April and May, the COVID-19 crisis hit meatpacking plant workers hard. National news buzzed about the large numbers of employees contracting the virus. Many plants temporarily closed or slowed down production as they installed safeguards.
Consumers found bare shelves in the protein aisle as supplies ran short and panic buying kicked in. Where meat could be found, prices were through the roof. Some people reported ground beef costing more than the usual price for steak.
At the same time, processors told farmers not to deliver animals to them. Farmers who were allowed to deliver were paid far less than normal for their animals.
This repeat of the Holcomb situation infuriated many farmers. They felt like the packers were taking advantage of another crisis to boost their margins on both ends.
Missouri Farm Bureau and other groups called on USDA to expand its Holcomb investigation to include the new issues. Secretary Perdue quickly agreed to do so.
Senator Josh Hawley went a step further. He asked the Federal Trade Commission to examine the industry's "conduct, pricing, and contracting," and possible effects of foreign ownership. Missouri Attorney General Eric Schmitt asked the Department of Justice to investigate the industry for antitrust violations. He also asked the DOJ to look into ways to promote competition, address market manipulation, and protect consumers. Missouri Farm Bureau and several members of Missouri's Congressional delegation joined the call for investigations.
It appears DOJ was listening. On June 3, its Antitrust Division announced it was indicting four senior executives for price fixing in the chicken market. The investigation is ongoing. Two days later, DOJ announced an investigation into the country's four largest meat processors.
We also need more data about the effects of consolidation on the markets and how proposed solutions would impact the industry. Missouri Farm Bureau has asked for help from the University of Missouri. The University's Food and Agricultural Policy Research Institute (FAPRI) is the nation's leading agricultural economics research center. Using FAPRI's analysis, policymakers can make informed decisions about any changes to the industry.
Missouri farmers and consumers deserve transparent prices and fair competition. If meatpackers are using unfair practices like collusion and price-fixing, this must be stopped. Using the best information and aggressive investigations, we can restore fairness to America's meat industry.