With four companies dominating the meat industry, Congress and federal regulators must intervene to assure that livestock farmers get a fair price from processors or “if need be, bust them up,” the president of the National Farmers Union said at a Senate hearing on Wednesday. It was the strongest call yet for reform from farm groups riled by months of low cattle prices at the same time consumers are paying high beef prices at the supermarket.
Several members of the Senate Judiciary Committee agreed reforms were needed, such as greater transparency in prices. Only a small portion of cattle are sold on the cash market. “What we need is the other 80 percent,” said Iowa Sen. Chuck Grassley, sponsor of a bill to require packers to buy half of their slaughter cattle on the spot market.
Officials from Tyson Foods and JBS USA, two of the Big Four packers, said market prices are pressured because there are more cattle available than packing plants can handle with continued worker shortages, due in part to the pandemic. “Everything to do with the law of supply and demand,” said Shane Miller, group president of fresh meats at Tyson. “It is taking six days of processing to get five days of harvesting (done).”
Farmers Union president Rob Larew called on Congress and USDA to enact reforms in price-reporting laws and the use of “Product of USA” labels, including a mandate for packers to buy a share of livestock on the cash market. The USDA should strengthen fair-play laws in marketing and encourage expansion of local processing capacity, he said. “Furthermore, it is time to push for more vigorous antitrust enforcement to rein in the unchecked power of the packers and if need be, bust them up.”
A handful of senators, including Democrat Cory Booker of New Jersey, expressed sympathy with “break them up” as an option.
Packers exercise “lopsided bargaining muscle” with farmers because they may be the only processor within miles, said senior policy counsel George Slover of Consumer Reports. “The vast majority of cattle are purchased in advance through long-term exclusive contracts, at pre-arranged prices, giving the packers a ‘captive supply’ and increasing their control over producers.” Tim Schellpeper, president of JBS’s fed beef division, said the alternative marketing arrangements “provide a mechanism for producers to realize premium prices” for top-quality stock.
Grocery wholesaler David Smith of Kansas City, speaking for the National Grocers Association, said “power buyers” increasingly dominate food marketing, in the same way a few companies account for most of the poultry, pork and beef supply. “These retailers use their control over the market to advantage themselves at the expense of everyone else,” said Smith, by dictating prices and access to exclusive products. “Needless to say, this makes it impossible for local store owners to compete with dominant retailers on price.”
Earlier in the day, Dustin Aherin, a Rabobank vice president, said the cattle backlog created last year by the pandemic “is nearly cleared and year-over-year are already improving.” In addition, slaughter capacity will expand by 8,000 head a day over the next five years, according to announcements by processors, potentially resulting in over-capacity, while the cattle inventory is likely to shrink somewhat.
“My recommendation to you is don’t overly focus on what is happening today, but make policies for the future,” said Purdue economist Jayson Lusk at the House Agriculture subcommittee hearing, such as “policies that improve the health of the entire industry.”
To watch a video of the Senate Judiciary hearing or to read written testimony, click here.
To watch a video of the House Agriculture subcommittee hearing or to read written testimony, click here.