Meatpackers fend off price-fixing charges from lawmakers

Executives at some of the biggest beef processors — Tyson, JBS USA, Cargill and the National Beef Packing Company — this week dismissed criticism from lawmakers that they manipulated the prices of their products.

At a congressional hearing held by the House Agriculture Committee on Wednesday, cattle executives were asked why their companies were reaping record profits while consumers struggled. The price of beef jumped 16% between March 2021 and March 2022, according to the Bureau of Labor Statistics.

Their testimony came as the Biden administration calls for meat industry consolidation and its impact on smaller competitors and meat prices. The four largest beef packers control 82% of the market, according to the White House.

Asked by Rep. David Scott, a Georgia Democrat, if there was an agreement among major producers to fix beef prices, each leader denied the charge.

Tyson Foods CEO Donnie King defended his company’s record profits last quarter, saying the meat industry is “the most transparent in the world” because producers are required to declare the prices they pay for the cattle and the prices at which they sell their beef. twice a day at the USDA. He added that Tyson is using the extra revenue to help cut costs.

“Tyson’s returns are also bolstered by our efforts to become a more agile and efficient business through innovation and automation,” King said in his testimony.

Tim Schellpeper, CEO of JBS USA, said his company sells its products at wholesale prices to grocers and food service establishments, and those prices have actually come down since last year.

And Tim Klein, CEO of National Beef Packing Company, said one of the reasons for higher beef prices was higher transportation costs and bottlenecks within the supply chain.

“The biggest factor we face right now is where we are in the cattle cycle,” Klein said. “There is simply more cattle available each week than there is demand capacity to process and scale.”

Several members of Congress have probed the fairness of an industry where a handful of companies hold such a high market share. Rep. Randy Feenstraa Republican from Iowa, said the biggest meat companies are able to use their influence to control prices through contracts and line speeds at their facilities.

“The system is set up where packers will never see a loss, creating huge guaranteed profits while rural farmers lose their livelihoods,” he said.

Gilles Stockton, a Montana cattleman and representative of the Montana Cattlemen’s Association, testified that the gap between the farm gate price and the retail price of beef fell from 71.3% in 1975 to 36 .5% in 2021, which means that for every dollar spent on meat at a grocery store, ranchers and cattlemen only receive 36.5 cents. Big meat packers wield their power through “captive supplies,” or livestock they own or have an agreement with producers to buy, Stockton said. He claimed that these agreements allow beef companies to control prices and prevent a large number of farmers from competing with each other.

“With captive supply levels now approaching 80% of all fed cattle, you can easily see how much ranchers and feeders are losing in this rigged market system,” Stockton said.

Schellpeper of JBS said the meat giant buys cattle through these alternative marketing arrangements, which he says allow producers to recoup their investments in genetics, animal health and marketing. He said JBS also buys from spot markets, which allows smallholder farmers to be competitive.

“JBS is active in the cash cattle market every day, and we will compete for quality cattle in the market where and how producers want to sell them,” Schellpeper said.

Breeders said Congress can stop anti-competitive practices in regulating captive supply agreements through the enforcement of the Packers and Stockyards Act, a 1921 law aimed at preventing the domination of the meat industry by larger players.

David MacLennan, CEO of Cargill, said his company is committed to investing in the farmers who supply its beef. He said the supply and demand market in the industry is a cyclical process and family farms could see higher profits in the coming years.

“We are also committed to empowering and providing the livelihoods of the people who grow and raise our food,” MacLennan mentioned. “We know how tough and cyclical the beef industry is.”

Tyson’s King said the concentration of beef processing has remained constant over the past 30 years and profits for ranchers and livestock producers have increased during that time, calling it “the labor market.” King also added that changing consumer demands for higher quality and more sustainable beef will drive needed changes in the supply chain.

“Innovation in the supply chain will be key going forward,” King said. “As packers, we need to find ways to incentivize breeders and producers to be able to do the things necessary to deliver that end product.”

Some lawmakers did not believe consolidation was the cause of massive profits and questioned Justice Department investigations into price-fixing in the meat industry. Representative Glenn Thompson, a Republican from Pennsylvania, said the hearing was a political attack on the beef industry on behalf of the Biden administration.

“If there has been collusion, manipulation or other wrongdoing by packagers, the law should be enforced under existing USDA and DOJ authorities,” Thompson said. “In the absence of such findings, it’s time to stop demonizing the packaging industry for political convenience.”

The beef packers’ testimony came a day after congressional hearings on two bills aimed at addressing critics’ concerns. The Livestock Price Discovery and Transparency Act aims to introduce market reforms to give producers more control and information when selling livestock. The Meat and Poultry Special Investigators Act seeks to establish a special investigator within the USDA to investigate alleged anticompetitive practices in the meat industry.

This year, President Joe Biden also took a major step toward industry consolidation by providing small meat processors with $1 billion in funding to spur competition. The funds will go towards independent transformation projects, as well as strengthening financing options, technical expertise and providing a living wage to smallholder farmers and their employees.

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