Billings Gazette: Ag secretary ready for round two on meatpacking reforms

by Tom Lutey

You could say Monday wasn’t Tom Vilsack’s first rodeo.

President Joe Biden was, figuratively, saddling up to ride to the rescue of both ranchers and consumers left short on cash by a meat packing industry in which four big players control more than 85% of the market.

Vilsack, who was also Agriculture secretary under Barack Obama, had done this before, when the effort was bucked into the dirt faster than you can say reelection.

But this time, Agriculture Secretary Vilsack is optimistic the outcome will be different, if for no other reason than Biden having $1 billion to expand the number of independent meatpackers competing against the industry’s big four: Cargill, Tyson Foods, JBS and National Beef packing.

The theory goes something like this: If there’s another buyer in the auction barn, there will be competition that will naturally increase the price paid to ranchers for cattle. The plan, announced this week, drew comments from Republican and Democratic politicians in Montana, signaling they wanted market reform, too. Livestock sales were worth about $1.5 billion to the state economy in 2020, but that number was $100 million lower than sales from the previous year, as supply problems hit ranchers and consumers squarely in their wallets.

“With the American rescue plan, we’ve got the resources to actually get something done on the financing side, and we’re putting the finishing touches on some rules and regulations that will be forthcoming in 2022 to strengthen enforcement,” Vilsack told the Lee Montana Newspapers on Wednesday.

“Our belief is that by expanding capacity, we increase competition. When you do that, you’re going to help farmers get a better shake out of the market. And you’re going to allow consumers to have choice in the marketplace, which also, we believe, will moderate price increases. And then secondly, you want to make sure that, there are two aspects of this, you want to make sure that you have enough information so farmers can determine whether or not they’re getting a fair shake.

“And that gets to the transparency in the market reporting that’s necessary. I need Congress to continue to extend mandatory reporting efforts that will allow us to get information. And you need, I think, for Congress to do what Sen. (Jon) Tester and Sen. (Chuck) Grassley are interested in doing, which is to create more market transparency, to have the right level of cash transactions that give you a sense of what the market truly is.”

The president Monday said that over the last 50 years rancher’s share of every dollar a family spends on beef had shrunk from 60 cents for every dollar to about 39 cents. Hog farmers who once received 40 to 50 cents of very consumer dollar spent now receive 19 cents.

The U.S. Department of Agriculture will invest $375 million in gap financing grants for independent processors to fill a need for more processing capacity. One of the lessons of the last few years is that a single disruption among the four major meatpackers can derail the beef market for both ranchers and consumers.

In August 2019 a fire at a Tyson Foods packing plant in Kansas created a bottleneck at both ends of the U.S. meat supply chain. Ranchers with cattle to sell were backed up by the decrease in production, which lead to an oversupply and lower prices for cattle as a result. On the consumer end, less beef was making it to supermarkets which led to higher prices as supply failed to keep up with demand.

Only a few months later, a ransomware attack on JBS cut the number of cattle slaughtered by 40,000 carcasses in just a day and a half.

USDA will put another $150 million toward the 15 independent processor projects that are near completion. Another $225 million will be invested in projects that can be brought online by summer. Federally backed loans totaling $275 million will be made available for independent meat processing in underserved communities.

Additionally, $100 million will be spent on creating a skilled workforce, which Montana meat processors said earlier this week is needed for any expansion of independent processing to succeed. There aren’t enough skilled meat cutters currently to staff Montana’s meatpacking industry, said Lyle Happel, of the Montana Meat Processors Association.

Demand for independent meat processing surged in the first year of the pandemic as COVID-19 sickness and death hit the packing plants of the big four meatpackers. At least 59,000 meatpacking employees were sickened by COVID-19 in the first 12 months of the pandemic in the United States. At least 269 workers died from COVID-19. Those numbers were reported to the U.S. House Select Subcommittee on the Coronavirus Crisis on Oct 27, 2021.

In Montana, where 31 meat processors are state inspected and 28 are federally inspected, there’s growth in the industry, though it can be difficult to measure because some activity is disguised as existing processors moving between state and federal inspection designation. The federal meat inspection is what’s needed to sell meat across state lines, which is attracting processors who are growing into multi-state markets.

USDA has $32 million available for 167 existing processors to cross over to federal inspection so they can reach more customers.

The new rules Vilsack references to police anti-competitive practices include making sure independent processors get a foot in the door to retail markets.

Getting access to space in grocers’ refrigerator cases is no small matter, said Walter Schweitzer, president of the Montana Farmer’s Union. Just like big brands buy shelf space in the cereal aisle, refrigerated space is real-estate big meat suppliers can secure and squeeze competitors out of.

“A big part of the piece of this puzzle is that if we’re going to have a more competitive market, we’re going to have to force not only these corporate packers to play fairly, but we’re going to have to force the retailers to play fairly too,” Schweitzer said.

MFU has been champing at the bit for country-of-origin labeling reform for meat. Currently “product of of U.S.A.” labels on meat packages in the store, aren’t limited to beef raised in the United States. The largest meatpackers process beef from Canada and Mexico at their 50 U.S. packing plants. When the meat is commingled during processing, that country of origin label winds up getting applied to meat from all three countries.

United States, under a law championed by Montana Democratic senator Tester, attempted to require a U.S. only COOL label, but Mexico and Canada objected, arguing that the label violated the North American Free Trade Agreement. The World Trade Organization then concluded that Canada and Mexico could impose tariffs on other U.S. exports in retaliation, after which the federal government killed COOL without challenging the WTO.

The way the labeling ended is a sore spot with Schweitzer.

“You know, this Product of USA label as it is right now is fraudulent,” Schweitzer said. “With the United States being one of the largest beef importers in the world, and you’ve got processing capacity owned by the Brazilian cartel (JBS). They’re mixing it. You know they are and they’re proudly doing it. And then they put the label on it.”

MFU wants the country of origin labeling to be mandatory and applied to U.S. beef only. They back a Tester bill to do so.

Vilsack said the labeling being rolled out under the Biden Administration is voluntary, though the U.S.-only requirements for what the label goes on are there. The agriculture secretary expects that once independent processors become more of a presence, and the U.S. label goes on their product, the biggest meatpackers will feel market pressure to do the same.

Could they skip the labeling? “Well sure, in which case when you’re going into the grocery store, you can know that product that you’re buying, at some point in time didn’t have connection with the U.S., versus that local producer that took a grant or loan from USDA to produce its own processing facility that puts a label on there and says ‘not only is a product of U.S., but this is a product of Joe Smith’s farm down the road,’ ” Vilsack said. “I guarantee you. I believe people will buy a package for Joe that’s got Joe Smith’s label on it. And that will drive market share, if you will, to the labeled products, as opposed to the unlabeled ones.”