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Beef

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"

President Biden

announced a

four-point plan

for increased competition in the meat industry on Monday, including 'across the board' enforcement of antitrust laws and support of legislation to inject transparency into cattle pricing," Chuck Abbott 

reports

 for the Food & Environment Reporting Network. "During a virtual meeting with farmers and ranchers, Biden said meatpacking, dominated by a handful of big processors, was a textbook example of the perils of corporate consolidation."


The administration will provide $800 million to support smaller meatpackers, including $50 million for technical assistance and research. "Agriculture Secretary Tom Vilsack said the goal with this new batch of federal grants and loans is to invest in at least 15 small packing plants and to take steps to recruit and train new workers for the industry," O. Kay Henderson reports for RadioIowa.

Also as part of the plan, USDA and the Justice Department are creating a new portal for reporting anti-competitive behavior in the meatpacking industry, Henderson reports.

Abbott reports, "The two other elements of the administration’s 'action plan' were previously-announced initiatives to spend $1 billion to increase the number of independent processors and to toughen USDA’s fair-play rules governing meatpackers."

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A recent feature piece in Meatingplace, a meat-industry magazine, takes a deep dive into major meatpackers' increasing market concentration, how that has hurt cattle producers, whether the federal government's response will help, and whether that might bring back small meatpacking plants.

Meatpackers were forced to briefly close early in the pandemic, but were back up and running within seven weeks, "racing like hell to work through inventory backed up at the feed yards," editor Tom Johnston reports. "Meatpacking leaders and regulators have hailed the relatively rapid rebound as a sign of the industry's durability even in the worst of times. But independent cattlemen say the supply-chain shocks resulting not only from the pandemic, but also the Tyson Foods' Holcomb, Kan., plant fire that preceded it and the JBS USA cybersecurity breach that followed it, spotlight its flaws."

Agricultural economists have begun to research the beef industry's resiliency in the face of such threats and what it means in the long term. It's tempting to think that redistributing processing capacity to smaller plants would increase the industry's resilience, but it's not that easy, said Azzeddine Azzam, a University of Nebraska agricultural economist who has applied to the Agriculture Department for a research grant to study the concept and told Johnston:

"First of all, resilience to what? Is it resilience to pandemic? Resilience to earthquakes? Resilience to floods? We really don't know. I think the pandemic has given us some tunnel vision. Yes, we have to protect ourselves against the next pandemic, but to me, resilience has to be resilience to a lot of unforeseen events that are going to close plants and back up cattle in feedlots."

Because resiliency means different things to different stakeholders, that confuses the debate over whether the supply chain needs fixing. Major meat processors enjoying "windfall margins" think the current structure is working fine, but "cowboys left in its dust say it doesn't work for them; packers' market power has eliminated competition and fair pricing for their cattle, an imbalance due for a course correction," Johnston reports.

Sympathy for ranchers has prompted a "groundswell of activity" from the executive and legislative branches of the federal government, including President Biden's recent executive order meant to increase competition among meat processors, "but packers are holding their ground, arguing that adding new policies — and packing capacity — in an attempt to change the industry's structure and shift market share could make it less 'resilient' in the long run," Johnston reports.

Severe drought in the West could ultimately swing power back towards ranchers, analysts say. A late July survey of farmers and ranchers from the American Farm Bureau Federation found that 85% of respondents said they're selling off portions of their herd or flock. "CattleFax analysts, at the 2021 Cattle Industry Convention and National Cattlemen's Beef Association Trade Show in Nashville in August, said the trend should tip leverage back to the producer," Johnston reports. "Randy Blach, the firm's CEO, expects a three-year liquidation to reduce feed yard placements, pushing the value of calves, feeder cattle and fed cattle up several hundred dollars per head over the next few years."

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Percentage of meatpacking and processing sectors controlled by top four companies in the U.S.
(Politico chart using Family Farm Action Alliance data)

"Covid-19 was a shock up and down America’s supply chain for meat, from farmers and ranchers who couldn’t find buyers for their livestock and lost revenue and animals, to grocery shoppers who encountered steep meat prices, item limits and empty shelves. But it wasn’t the first or only such shock. Just a handful of giant companies process the vast majority of America’s beef, pork and poultry," Ryan McCrimmon

reports

for Politico. "Take the beef sector: Four companies process about 85 percent of all the cattle fed and slaughtered for boxed beef, namely muscle cuts like ribs and steaks. That means that when one or more large meatpacking site is forced to shut down, it has ripple effects across the entire country, interrupting supplies and often raising prices. Just in the last three years, the meat supply chain has also been disrupted by a

fire at a major Tyson Foods plant

in Kansas and a ransomware attack that

shut down JBS plants

that process a fifth of the U.S. beef supply."


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"Prices for beef, pork and chicken have surged during the pandemic, and the Biden administration believes it knows who's partly behind it: a handful of

big meatpacking companies that control

most of the country's supply. Beef prices alone jumped 12.2% over the last year, according to new consumer inflation data on Tuesday, making it one of the costliest items in the surging bills that consumers face today at the grocery store," Scott Horsley 

reports

 for NPR.


"The surge in meat prices is contributing to high inflation. The Labor Department reported Tuesday that consumer price index rose 5.3% in the 12 months ending in August. That's down slightly from June and July when inflation was running at 5.4% — but it's still near the highest level in nearly 13 years. Pork prices jumped 9.8% in the last year while chicken prices jumped 7.2%."

Market prices for lean hogs are slightly above where they were a year ago, after a long climb in the winter and spring that made them almost double the 10-year low they hit in January. Cattle market prices are slightly higher than a year ago, after several ups and downs, but are well below 5- and 10-year highs.

Farmers who raise meat animals have long complained that major meatpackers exert too much control over the market, with four processors taking more than 80% of production. The Agriculture Department is investigating whether such companies have colluded to raise beef prices by limiting supply. President Biden specifically addressed meatpackers in a July 9 executive order aimed at promoting economic competition.

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