Beef producers not sure Biden meat packing program will help

By: 
Ryan Hanrahan with the Buffalo Bulletin, from the Wyoming News Exchange

Beef producers not sure Biden meat packing program will help

 

By Ryan Hanrahan

Buffalo Bulletin

Via Wyoming News Exchange

 

BUFFALO — The Biden Administration announced in early January it is setting aside $1 billion of American Rescue Plan Act funds to help foster a “fairer, more competitive, and more resilient meat and poultry supply chain.” 

But local ranchers and industry insiders in Wyoming are concerned that the money will be no more than a Band-Aid fix for a complex problem. 

The funds are designed to address market and supply-chain issues stemming from the consolidation of meat processing by the Big Four meat processing companies — Tyson Foods, Cargill Meat Solutions, JBS SA and National Beef Packing. 

The most recent data from the Open Market Institute show that those four companies control 82% of the market for beef, an increase from just 25% market control in 1977. 

In recent years, cattlemen’s groups and some lawmakers have accused the packers of market manipulation. Because the Big Four control so much of the slaughtering and processing capacity, producers say that the packers can deflate prices to the producer by buying fewer animals. At the same time, the packers can also create artificial demand by releasing less meat to retail outlets, thereby driving up the price that consumers pay. 

Jim Magagna, executive vice president of the Wyoming Stock Growers Association, said the Big Four processors provide some upsides to producers — like the ability to process large volumes of animals in a timely fashion — but because the Big Four control prices on both ends of the supply chain, there is little competition and very little leverage for cattle ranchers. 

“Today, we’ve got literally thousands of producers producing finished cattle,” Magagna said. “On the other end, we’ve got thousands of retail users of beef that are competing for the product, and then you’ve got that narrowing down in the middle, where it’s basically four firms that are controlling the processing.” 

As of December 2021, producers are receiving roughly 39% of the retail price paid per pound for ground beef, according to the U.S. Department of Agriculture. 

For example, a $10 package of ground beef at the grocery store would net a cattle producer roughly $3.90. 

“The average consumer doesn’t realize the spread of how much the producer gets,” said Mark Largent, owner of Largent and Sons Ranch in Kaycee. “Say, if we send a fat steer in — let’s just say, most producers don’t fatten them all the way to slaughter weight in finish, but if we did — we wouldn’t get probably a fifth of what the meat will cost in the meat counter.” 

Working in conjunction with the USDA, the administration plans to take a multifaceted approach to help increase independent processing capacity. 

The largest portion of funding — $375 million — will be used to directly support the creation of new, independent meat processing plants, according to a news release from the White House, with an expected 15 new processing projects receiving funding in the spring. 

The money is also expected to be used in partnership with the USDA to make more loans available for independent processing projects.  

The funding won’t just be used for construction projects, however. Some $100 million is earmarked to train and support a larger workforce the industry would need to staff the new plants. 

An additional $50 million will be set aside to support research and development, and $100 million will be set aside to help with costs associated with federally required inspection costs.

While Magagna and local rancher Dave Belus both believe the coronavirus relief bill funds will likely be helpful for facets of the meat processing industry, neither believe it is a significant fix for the market control the Big Four have.

Belus said he is most concerned with the locations of the new processing plants. 

“The problem that I see with them giving all this money out to these places to build packing plants is not everybody can feed the meat,” Belus said. “There’s only certain places that have the resources to grow the feed, and so if you put these packing places in places that are just grass, I don’t know if that benefits those as much.” 

For his part, Magagna said he wants to receive the results of any investigation into the Big Four before money is distributed, so he can better know how to best use it to fight their market control. 

“We would like to see that result first and know, are they just using normal market power, or is there anything that needs to be dealt with, you know, through prosecution or through changes in regulations or in laws beyond that,” Magagna said. 

At the federal level, U.S. Rep Liz Cheney, along with 23 of her colleagues, said in a letter to Secretary of Agriculture Tom Vilsack that while they appreciated the administration’s looking into the issues, they believe it is only a “short-term fix” for the problem. 

The lawmakers’ largest concern was that new independent processing plants would likely create a greater need for federal meat inspectors, which would exacerbate the current shortage of federal inspectors around the country.

“For small and independent processors to thrive, USDA must increase the number of meat inspectors available,” the letter reads. “This can be achieved through the direct hiring of more USDA inspectors or through cooperative agreements with state inspection programs.” 

Magagna said his main concern with the funding is ensuring that it’s used to open the market naturally and without government control, though he’s hopeful that it will support the “midsize” processing plants — that could handle between a couple hundred to 1,000 head of cattle each day — which he says is likely the best way to begin to bring the meat processing market back into balance. 

“I think it’s going to take a series of those across the country to really address the competitive position that the Big Four are in today,” Magagna said. “So, the funding that the president has proposed could certainly be very instrumental in helping that happen.” 

Ranchers around Johnson County, like Belus, are hopeful that the coronavirus relief package money can help alleviate some of the problems they experience every day. 

He said he knows that potential new processors could make it easier for consumers to get their meat locally, though he knows that, for now — like many others in the industry — he will likely still have to rely on the Big Four.

“I guess it (the federal money) will make it easier to get our beef killed on a local level for local people that want to buy it. That makes it a little bit easier,” he said. “But for those of us that sell a lot of cattle, it’s still going to go through the big packers.” 

Magagna’s main concern about the meat processing industry is whether the Big Four established their market dominance legally — which led the Stock Growers Association to reach out to the Department of Justice to look into the packers’ business practices. 

“It’s our understanding an investigation was undertaken,” Magagna said. “To date, there’s been no feedback on that — it’s now been almost going on two years — whether they’re finding any illegal practices, in which case, we would expect to have some prosecutions, or they find  nothing and the case is closed.”

The Big Four have also faced a number of lawsuits over the past decade alleging they conspired to suppress cattle prices paid to producers and raise beef prices paid by consumers, though as of the start of 2022, those lawsuits have not been settled. 

Because of these concerns, and concerns from others around the country, the Biden administration said in its news release that it plans to work to strengthen the Packers and Stockyards Act of 1921 — which helps regulate the industry — and to review and update its policies for what meat can be labeled as a “Product of USA” and work with the DOJ to make it easier for farmers and ranchers to report potential unfair practices they encounter. 

 

This story was published on Feb. 3.

Category:

News Letter Journal

News Letter Journal
14 W. Main St.
P.O. Box 40
Newcastle, WY 82701
Ph: (307) 746-2777
Fax: (307) 746-2660

Email Us

Facebook

Please Login for Premium Content