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WHITE HOUSE PLANS TOUGHER ACTION ON MEAT INDUSTRY!

White House plans tougher action while blaming 4 biggest companies in meat industry.

WASHINGTON

Rising meat prices at US supermarkets have become the subject of increasing debate, with the blame being placed on key companies in the industry along with the COVID-19 pandemic.

While US grocery prices have been on the rise due to the pandemic, rising meat prices are cited as one of the primary reasons for food inflation.

The latest data released by the US Department of Labor reveal that the Consumer Price Index (CPI) rose by 5.3% on an annual basis in August and food inflation by 3.7% in the same period.

The latest CPI data show that beef and veal prices increased by 12.2% and pork prices by 9.8% while prices of poultry such as chicken and turkey rose by 7% in August compared to the same month of the previous year.

Data from a report published on the White House Briefing Room Blog show that since December 2020, beef prices have risen by 14%, pork by 12.1%, and poultry by 6.6%.

The Department of Agriculture meanwhile expects an increase of 5% to 6% in beef and veal prices, 6% to 7% in pork meat prices, and 16% to 19% in wholesale poultry prices this year.

According to the data by the department, the average price of ground beef, which was 3.881 dollars per lb. (453.6 gm) in March 2020, when the pandemic began, increased to 4.468 dollars in August 2021.

Lack of competition

According to the producers, supply bottlenecks including high feed costs, logistic problems, and labor shortages are the causes of the rising prices. The White House says the price increases are also driven by a lack of competition in the meat supply chain.

In a blog post in early September, the White House announced that strong actions would be taken to crack down on illegal price fixing, enforce antitrust laws, and bring more transparency to the meat-processing industry.

White House

In the post, only four large conglomerates were said to be controlling the majority of the market, and these companies have been raising prices while generating record profits during the pandemic.

Citing the Department of Agriculture data, the White House said that the four firms control approximately 55%-85% of the market for these three products.

According to a review by the nonpartisan watchdog group Accountable. US, the big meat processing companies have been subject to price-fixing lawsuits, with many agreeing to pay at least $400 million in fines and settlements for manipulating prices.

The companies included in the Accountable.US review are Smithfield Foods, JBS, National Beef Packing Co., Tyson Foods, and Cargill.

‘Higher feed prices and strong export demand’

“There were some strong price increases in wholesale beef and pork prices earlier this summer driven by higher feed prices and strong export demand, but for the past month, wholesale prices of both these products have been trending downward,” said Jayson Lusk, a distinguished professor and head of the Department of Agricultural Economics at Purdue University.

Dr. Jayson Lusk

“It isn’t out of the question that there might be anti-competitive behavior in certain instances,” Lusk said.

He added that there is a broader cyclical trend that is driving much of the current controversy.

“The other interesting comparison is the change in stock prices over the course of the pandemic. Since Jan. 6, 2020, the two big publicly traded meat companies, JBS and Tyson, are down 5.83% and 16.69%. By contrast, the S&P 500 is up 38% and Walmart is up 22%,” Lusk said.

“The market doesn’t seem to think meatpacking has become a more attractive investment opportunity over the course of the pandemic,” he added.

Andrew Novakovic, a professor emeritus of applied economics and policy at Cornell University, said that ground meats and meats, in general, were profoundly impacted by the early stages of the pandemic – partly due to panic buying, but also due to supply disruptions in processing plants.

“Chicken showed a pandemic impact, but of a much lower magnitude,” he added.

“What the data indicate is that the general level of price inflation for meats exceeds that for all food purchased for home use and a reasonable substitute product – cheese. Also, it is much higher than for chicken,” Novakovic said.

Dr. Andrew Novakovic

“Maize and soya prices have seen huge increases in 2021, for both supply and demand reasons. As these are indicative of the largest component of livestock production costs, this has played a role in cattle prices. Although far below the numbers we saw in Spring 2020, prices for live cattle are definitely well above the average for recent years,” he said. “Thus, some of what we see in grocery stores simply reflects general supply and demand conditions.”

Novakovic also said there is no question that the number and size of meat processors has been a major concern among ranchers (beef) and pork and poultry producers.

“The US has several laws related to market competition in general and the meat-packing business in particular,” Novakovic said. “I will not be surprised to see more aggressive application of these laws in the future, but I think we are still at a stage of untangling how much of the price effects we are seeing are due to the unusual stresses of the pandemic economy and what might be due to anticompetitive behaviors in the meat sector.”

By Dilara Zengin,

www.aa.com.tr

About İsmail Uğural

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