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Apr 26, 2022   |  

The Hill: Meatpacking CEOs set to take heat from Congress amid soaring prices

By: Tobias Burns

The CEOs of several meatpacking companies are expected to come under tough questioning from lawmakers Wednesday at a House hearing where soaring food prices are likely to take center stage.

Households are facing a 40-year-high in inflation, which has put heavy political pressure on the Biden administration ahead of the midterms.

Biden and congressional Democrats have vowed to crack down on corporate consolidation and monopolistic practices in the private sector as one part of their effort to stop inflation - and the finger on Wednesday will be pointed at the meatpacking industry.

Since last year, overall meat and fish prices have risen nearly 14 percent on an annual basis, according to data from the U.S. Department of Labor, spurred on by pandemic-induced supply chain disruptions, overall high demand, and an overabundance, some economists say, of fiscal stimulus.

Ground beef was up 22 percent in March since last year, steak and sirloin were up 27 percent, and sliced bacon was up 26 percent. In January, the White House wrote that "meat and poultry prices [are] now the single largest contributor to the rising cost of food people consume at home."

Some congressional Democrats have also argued that low levels of competition by companies that do more implicit cooperating than competing across various industries have also contributed to inflation.

"Capitalism isn't working in this particular instance, because of concentration and consolidation in the industry," Sen. Jon Tester (D-Mont.) said during an initial hearing on Tuesday of the Senate Agriculture, Nutrition and Forestry Committee. "Consumers are paying higher prices, because without competition, they're set without regard to what people can afford."

"[Agricultural] production has gotten far more consolidated" over the last forty years, Tester added. "We've seen a mass exodus off the land. Rural America is drying up. On the other side of the equation, we see consumers that are being treated unfairly."

The top executives of major U.S. meatpackers Cargill, Tyson, JBS, and National Beef Packing will testify before the House Agriculture Committee at Wednesday's hearing.

Bills now under consideration by Congress would set up a new enforcement division in the USDA aimed at increasing competitive market practices in the meat industry. They could also modify price-setting rules, which critics say have unfairly advantaged meat packers over producers and consumers.

The legislation would compel the USDA to find ways to "eliminate the potential for price manipulation, and enhance cattle producer leverage in the marketplace."

Favorable pricing rules have led to outsized profitability for the "big four" meatpackers of Cargill, Tyson, JBS and National Beef Packing, which account for 85 percent of industry volumes, lawmakers said. Sen. Cindy Hyde-Smith (R-Miss.) said the high profits were hard to explain.

"The ‘big four' have increased gross profit share by 120 percent, while net incomes have surged by 500 percent. How do we explain these skyrocketing profits while input costs are rising?" she said.

Not all lawmakers on the committee were confident in the proposals.

Sen. John Boozman (R-Ark.) said that with respect to the Meat and Poultry Special Investigator Act, which would increase USDA market practice enforcement through coordination with agencies like the Department of Homeland Security, he was "very uncertain about the legislation's purpose and goals."

"The legal experts have shared with me that this newly created office at USDA will potentially just duplicate functions already performed by the USDA, the Department of Justice, the Federal Trade Commission, and the Department of Homeland Security," he said. "Do we really think that creating yet another government entity is a real solution?"

The Biden White House has also called attention to biases in the meat packing industry that create bottlenecks in the supply chain and have led to infrastructure vulnerabilities.

"Over the last few decades, we've seen too many industries become dominated by a handful of large companies that control most of the business and most of the opportunities-raising prices and decreasing options for American families, while also squeezing out small businesses and entrepreneurs," a White House economic brief said earlier this year. "The meat and poultry processing sector is a textbook example, with lack of competition hurting consumers, producers, and our economy."

Corporate watchdogs have also been sounding the alarm about the structural weakness of the meatpacking sector, which is an issue that Sen. Deb Fischer (R-Neb.) said "has existed for years."

"Confronting meatpacker profiteering is urgent, since March 2022's record inflation rate was largely driven by food prices," left-wing advocacy organization Accountable.US said in a statement. "Food-related price hikes pose a particularly acute threat to the 42 million Americans who said they couldn't afford enough food in January 2022."

The Environmental Protection Agency (EPA) estimates that agricultural production accounts for more than 11 percent of U.S. greenhouse gas emissions, with cattle production making up around 3 percent of the total, according to the USDA.

The contribution of enteric fermentation, which is the digestive process that produces methane in the guts of cows and adds to global warming, has increased 7 percent over the last 30 years, EPA data shows.

The "increase in emissions from 1990 to 2020 in enteric fermentation generally follows the increasing trends in cattle populations," the EPA concluded in an 841-page report on greenhouse gases released this month. "Emissions increased from 2014 to 2020, consistent with an increase in beef cattle population over those same years," the agency said.

https://thehill.com/policy/finance/3465081-meatpacking-ceos-set-to-take-heat-from-congress-amid-soaring-prices/

 

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