Agriculture Secretary Tom Vilsack and National Economic Council Director Brian Deese unveiled a new report Wednesday that in unusually strong terms blamed consolidation in the beef, pork and poultry sectors for higher grocery store bills and unveiled new actions to address the situation.
“One of the interesting findings of the report that we put out today is that about half of the overall increase in grocery prices can be attributed to a significant increase in prices in three products: beef, in pork, and in poultry. And in beef and in pork, we've seen double-digit increases in prices over the last couple of months,” Deese told reporters at a White House briefing.
Anywhere from 55% to 85% of the market is controlled by the top four producers in those industries, Deese said, while raising concerns about “pandemic profiteering,” which he described as companies that are driving price increases in a way that hurts consumers while not benefitting the farmers and the ranchers growing the product.
Deese said this is going to be one of several issues discussed during the inaugural meeting of the President's Competition Council on Friday -- about promoting greater competition across the economy.
In response, meat processors say it’s “inflammatory” for the White House to link higher meat and poultry prices to corporate consolidation.
Mark Dopp, general counsel and senior vice president of regulatory and scientific affairs for the North American Meat Institute, says companies “of all sizes” have been affected by the pandemic.
“American consumers of most goods and services are seeing higher costs, largely due to a persistent and widespread labor shortage,” he told Agri-Pulse. “The meat and poultry industry is no different.”
Industry giant Tyson Foods issued a statement that said the company "categorically rejects" the administration's allegations that the disparity in producer and supermarket prices was due to profiteering.
"Multiple, unprecedented market shocks, including a global pandemic and severe weather conditions, led to an unexpected and drastic drop in meat processors’ abilities to operate at full capacity. This led to an oversupply of live cattle and an undersupply of beef, while demand for beef products was at an all-time high. So, as a result, the price for cattle fell, while the price for beef rose. Today, prices paid to cattle producers are rising," the statement said.
Vilsack said USDA views its challenge as two-fold: Making sure that farmers get a fair return for their efforts and capital investment and that consumers get fair retail prices.
“The reality is today that farmers are losing money on cattle, on hogs, and poultry that they're selling, at a time when consumers are seeing higher prices at the grocery store…. the fact that there are now record profits or near-record profits for those in the middle.
Vilsack said the Biden administration is focused on four major steps.
The first, he said, is to strenghten the existing regulatory system under the Packers and Stockyards Act "to make sure that we are identifying and holding people accountable for unfair and discriminatory practices and that regulatory changes are now being undertaken as we speak," Vilsack said.
The second step is to make sure that there's adequate price discovery in the market. “Because there is such consolidation, there is very little cash transaction that takes place in this market, and so it's very difficult to determine whether or not the prices that are being paid to farmers are fair. And so we are producing studies -- recently a couple of studies -- to provide more price discovery. Certainly, we want to work with Congress in their efforts legislatively to pass legislation that will expand the capacity for us to have information," Vilsack said.
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“Third, we want to make sure that when people go into the grocery store and they see things that are labeled “a product of the U.S.,” we want to make sure that consumers fully understand and appreciate precisely what that means or what it doesn't mean, and whether people are taking advantage of whatever value-added opportunity that might present to increase price," Vilsack said.
The fourth step, according to Vilsack, is to increase processing capacity and maintain the small processing facilities.
"We provided additional resources to keep those small processing companies in business recently by announcing about $150- to $160 million of assistance and help. And we have put together a $500 million effort to work with states and local governments, as well as nonprofit organizations and the livestock industry, to look for ways in which we can finance expanded processing capacity," Vilsack said.
Vilsack acknowledged that “we’re doing this at the same time that agriculture is confronted not just with the issue of concentration and consolidation, but also the impacts and effects of severe weather, which are linked in part to climate -- whether it's forest fires or drought or hurricanes. Obviously, that's also causing a disruption. And as we build this broader processing capacity, we also want to build a more resilient food system.”
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