The debate over the drivers of food price inflation continues
WASHINGTON — Is consolidation and anti-competitive behavior leading to inflated prices for meat and poultry? Stakeholders on both sides of the debate made their case during testimony before the U.S. House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law. House Judiciary Committee Chairman Jerry Nadler (D-NY) said, “This hearing is part of a larger effort to not only diagnose the problems facing our food system, but also to find solutions. significant.”
The Biden administration has flagged meat prices as “…the biggest contributor to the rising cost of groceries, in part because only a few large companies dominate meat processing.”
Speaking from a producer’s perspective, Joe Maxwell, president of Farm Action, an advocacy group that focuses on agricultural issues. In his testimony, Maxwell argued that the consolidation of agriculture poses risks to food security and national security.
“Concentration is driving up food prices, contributing to the recent surge in inflation,” Maxwell said. “Concentration in the food system is pushing farmers off the land and businesses out of business, undermining the economic vitality of rural America.
“It unreasonably benefits from supply chain disruptions that leave shelves empty at the grocery store, higher prices for consumers and steal profits from farmers, increasing the burden of taxpayer-funded subsidies and safety nets that support farmers and provide food-insecure households,” he said. “It’s a self-perpetuating cycle of destruction that is tearing rural America apart.”
Julie Anna Potts, president and CEO of the North American Meat Institute (NAMI), said in testimony before the committee that multiple factors are at play.
“In 2020, pandemic-related plant outages temporarily slowed about 40% of cattle and hog slaughter capacity at the height of its impact,” Potts said. “This disruption occurred alongside unprecedented retail demand for beef due to panic buying and freezer stocking as shelter-in-place orders were made.
“The situation has been compounded by the significant operational changes needed to rebalance production, processing and distribution from food service to retail,” she added. “Cuts, product sizes, processing equipment, packaging and distribution vary widely between retail and foodservice and are not easily transferred, but the industry has been resilient and adapted.”
The pandemic has also exacerbated existing challenges such as the lack of available manpower.
“Production in meatpacking and processing plants is labor intensive and is therefore tied to the number of employees working on the line,” Potts explained. “Throughout 2021, although the comprehensive COVID-19 protections instituted by the meat industry since the spring of 2020 have been successful in reducing transmission among meatpacking workers and maintaining rates lower than case rates in the general U.S. population, worker shortages have persisted. The Meat Institute regularly hears from member companies challenged with 20% absenteeism every day. Without a stable and reliable workforce, factories do not operate efficiently and production declines. Work is ability.
The meat industry faces an ongoing labor shortage, highlighting the need for an expanded year-round guest farmworker program, Potts said. The current program is inadequate because it is seasonal and does not include the meat and poultry industry.
“If Congress wants to take real action that will help producers and consumers, then pass legislation to alleviate labor shortages in packing and processing plants,” Potts said.
Ultimately, economic fundamentals drive inflation, according to Potts. Labor shortages, transportation and supply chain disruptions, and regulatory policies have collectively driven up wholesale and retail beef prices.
But Maxwell argued that market fundamentals fail to explain “…the market dynamics of concentrated corporate power.” Maxwell said at least four companies control the inputs farmers need to produce crops, livestock and poultry.
“The level of concentration and vertical integration in the poultry industry is at such high levels that there are almost no individual independent poultry farmers left today,” according to Maxwell. “The majority of growers in the poultry industry are contract poultry growers, who raise poultry from a vertical integrator for companies such as JBS/Pilgrims, Wayne Farms, Sanderson Farms and Tyson Foods.
“These companies own the chick from the hatch to the grocery store shelf,” he continued. “Farmers have become owners and owners of the barns used by the vertical integrators where the farmer provides the facilities, labor and manure management. Often, the contracted poultry farmer has borrowed millions of dollars from his home and farms in order to build the facilities that house the chickens of one poultry integrator per flock. Since these barns are designed solely for poultry production and often only meet the specifications of a single poultry integrator, the farmer becomes trapped and beholden to the large poultry integrator in his area.
“In reviewing $1.8 billion in loans to poultry farmers under contract by the Small Business Administration (SBA), the SBA Inspector General found that the level of control exercised by the vertical integrator over the farmer substantially exceeded the contracted poultry farmer’s entire ability to operate their business independent of the mandates of the vertical integrator,” Maxwell said in his testimony. “The contracted poultry farmer lives in an economic reality where a false move or going over the line results in the loss of his contract with the vertical integrator, and possibly his farm and house as well.”
Also testifying at the hearing were Allison Johnson, Sustainable Food Policy Advocate, Natural Resources Defense Council; Geoffrey Manne, President and Founder, International Center for Law and Economics; Trina McClendon, owner of Trinity Poultry Farm LLC; Michael S. Needler Jr., CEO, Fresh Encounters; and Peter St. Onge, Research Fellow, Economic Policy, The Heritage Foundation.