Officials have tried to deflect criticism over inflation by alleging that large companies have too much clout
The White House announced Monday that it will devote $1 billion to aiding independent meat and poultry producers, aiming to undercut the four powerful meat producers the Biden administration has alleged are responsible for surging consumer prices. Facing immense political pressure over inflation, the White House has responded in recent weeks by criticizing large corporations and arguing that more competition will drive down prices. In November, President Biden asked the Federal Trade Commission to look into whether oil and gas companies were improperly pushing up energy prices. This approach might not lead to a marked change in prices, though White House officials have tried to take credit for a recent retreat in gasoline costs.
But the intensifying messaging tactic could serve as an attempt by the Biden administration to reframe the debate about inflation by pinning some of the blame on large corporations. Republicans and even some Democrats have said the White House needs to acknowledge that its own policies could be driving up costs, and price increases have persisted much longer than some policymakers initially predicted. By trying to shift blame toward corporations, the White House is acknowledging that price pressures continue to be a major concern for many Americans less than 12 months before the midterm elections. “I’ve said it before and I’ll say it again: Capitalism without competition isn’t capitalism. It’s exploitation,” Biden said at a White House event to discuss meat and poultry supply chain issues. “That’s what we’re seeing in meat and poultry and those industries now. Small, independent farmers and ranchers are being driven out of business — sometimes businesses that have been around for generations. It strikes at their dignity, the respect and the family legacy so many of them carried for generations.”
The stakes are particularly high in the beef industry, where prices in November rose by a staggering 21 percent relative to last year, according to federal data. Food prices have also increased more broadly — by a significant 6.4 percent — with the index for meat, poultry, fish and eggs jumping 13 percent.
The White House unveiled measures Monday designed to boost competition in the meatpacking sector.
The steps include $375 million in grants to help independent meat producers; $275 million in capital; $100 million in training for the meat and poultry workforce; and $100 million to reduce inspection costs on “small and very small processing plants,” a statement said. The White House said the funding comes from the $1.9 trillion American Rescue Plan passed by Democrats through Congress in March.
Industry groups and many economists have been critical of the administration’s attempts to redirect blame for inflation to large companies. They argue that high consumer demand — supercharged by the relief plan — is responsible for widespread inflation.
There is a disconnect between what ranchers and cattle raisers earn per animal and what the major meat processors are charging for the finished meat at the wholesale and retail levels, said Scott Bennett, the director of congressional relations at the American Farm Bureau Federation.
“Everybody is scratching their heads wondering what is going on. We’ve seen extreme volatility in the cattle market,” he said.
Bennett said the Farm Bureau has been advocating for additional slaughterhouse capacity.
“These small local regional packers are great for our communities. We’ve been lobbying for having those types of facilities more ready and available, and we’re pleased to see this administration funnel hundreds of millions of dollars into that effort.”
Industry groups have rebuked the administration for its approach. Tyson Foods, for instance, has said rising prices are the result of the “drastic” drop in production caused by the global pandemic and severe weather.
The White House published an analysis in November that found the large meatpackers’ profits rose 300 percent during the coronavirus pandemic. In a blistering response, Julie Anna Potts, North American Meat Institute president, said the calculations “awkwardly and misleadingly combine these sectors and the council’s analysis conveniently excludes data on rising input costs, rising fuel costs, supply chain difficulties and labor shortages that impact the price of meat on the retail shelf.”
Prices in 2021 rose at the fastest pace in nearly 40 years for things across the board, from rent to used cars to groceries. But some prices have risen faster than others. For food purchased at the grocery store, the category of meat, poultry, fish and eggs saw the steepest gain at 12.8 percent in November compared with a year ago. By comparison, baked goods rose 4.6 percent, and fruit and vegetable prices rose 4 percent.
Overall, food prices rose 6.1 percent for the year, but that pales when compared to gas prices up 58 percent, rental car prices up 37 percent and propane costs jumping 34 percent.
Poultry prices in particular, up 9 percent for the year, modestly outpaced inflation, and, according to Mike Brown, president of the National Chicken Council, its industry is the least consolidated in animal agriculture, with the market share owned by the top four companies virtually unchanged for the past 20 years.
The Biden administration’s new action plan, he said, “looks like a solution in search of a problem.”
While the demand for beef during the pandemic has skyrocketed, statistically Americans have swapped out beef for chicken. According to the U.S. Department of Agriculture, in 1976, total per capita beef consumption in the United States was 94 pounds; chicken was 42. Last year, beef was 58 pounds and chicken consumption rose to 97 pounds per person. Brown says this surge in consumer demand has meant success for both family farmers and huge conglomerates, and that chicken companies have waiting lists of potential family farmers who want to enter the chicken business.
“It’s time for the White House to stop playing chicken with our food system and stop using the meat industry as a scapegoat for the significant challenges facing our economy,” Brown said. “This administration should be looking at the chicken industry as a model of success, instead of creating a boogeyman to justify an unnecessary and expensive foray into our meat supply.”
Democratic economist Larry Summers, who warned the administration that its 2021 stimulus would cause inflation by overheating the economy in the spring, has strongly criticized policymakers who see antitrust efforts as a way to combat price increases. Summers said on Twitter last week that the idea that antitrust policy could be used to reduce prices amounted to “science denial.”
“Monopoly may lead to high prices but there is no reason to expect it to lead to rising prices unless it is increasing,” Summers said on Twitter. “There is no basis whatsoever thinking that monopoly power has increased during the past year in which inflation has greatly accelerated.”
Fiona Scott Morton, an economist at the Yale School of Management, said some of the White House’s measures, such as subsidizing independent meatpackers, would be unlikely to change consumer prices this year, unless new entrants are able to quickly join the market. But the steps could cause the existing large producers to rethink their prices and payments to workers and farmers, which she said could make an immediate impact.
Don Close, senior animal protein analyst for Rabobank, said there are a number of reasons the big packers have been charging more for meats, especially beef, and that it isn’t about anticompetitive practices. He said pre-pandemic the average starting wage in beef plants was $14.50 an hour, and that an entry level wage now is $22 per hour. The single biggest reason for the difference between rancher earnings and processor meat prices, he said, is the plants’ inability to hire enough workers.
A number of industry officials have pointed to these rising wages and higher fuel, feed and fertilizer costs to explain the spike in meat and poultry prices, but Family Farm Action Alliance President Joe Maxwell said meat conglomerates’ skyrocketing profits tell a different story.
“The truth of the matter is, yes, meat processor costs are going up, but in the beef industry their net profit margin is up 300 percent at the end of last quarter relative to a year ago,” said Maxwell, whose group advocates on behalf of smaller farms. “They are using excuses to gouge the consumer.”
Maxwell points to more than a decade of antitrust lawsuits in the industry, the pace of which quickened in 2021: In May, a federal grand jury in Denver indicted Claxton Poultry Farms on charges that it participated in a nationwide conspiracy to fix prices and rig bids for broiler chicken products. In July, a federal grand jury in Denver indicted Koch Foods and four Pilgrim’s Pride executives accusing it of the same conspiracy. These cases have not gone to trial yet and the companies have not acknowledged wrongdoing. Growers, restaurant chains and retailers have also sued major meat companies over anticompetitive practices like price fixing.
According to Maxwell, Monday’s action is a significant and meaningful first step, but the Biden administration must request congressional funding to restore the enforcement power of the antitrust divisions at Department of Justice and the Department of Agriculture.
During Monday’s White House event, Attorney General Merrick Garland announced a new joint initiative between the USDA and Department of Justice, an online portal to be “a one-stop shop” for antitrust complaints.
“Too many industries have become too consolidated,” he said. “It is a fact that our antitrust division has been underfunded for too long. We are urging Congress to allocate the resources we need.”