Ever since the economy reopened after the pandemic, consumers
have been seeing a dramatic increase in their grocery bills, especially on the
prices of meat, with beef up 14% since December 2020, pork by 12.1%, and poultry
6.6%. From computer chips to processed meat, the cost of living in the United
States has been rising without a doubt. Unlike many products with rising prices,
the increase in meat price is not solely due to the supply chain issue. Instead,
many suspects that the dominant power over prices of the few big meat
processing companies has in the meat market is at the core of the problem. The
four giants in the industry are JBS, Cargill Meat Solutions, Tyson Foods, and
National Beef Packing Co, which accumulates between 55% and 85% of the market.
The huge market shares not only gave the meat titans power over
the selling prices to retails and restaurants but also over the buying price for
livestock from farmers. Due to the soaring demand for stockpiling meat during
the pandemic, wholesale meat prices soared but livestock prices fell, which gave
big meat processing companies record-high profits and margins. Both farmers and
consumers are hurt while the meatpackers are the only ones collecting dollars from
the pandemic.
Despite practicing a “laissez-faire” economic system, the U.S.
government has a history of imposing policies to regulate the meat market. The
Packers and Stockyards Act passed by President Woodrow Wilson and the price ceilings
on beef, pork, and lamb imposed by President Richard Nixon in 1973 both aimed
to monitor and control the big meat processors. Similarly, the Biden administration
made an attempt to boost the competition with the big players by pledging $500
million in federal loans and grants to help small meat processing businesses to
enter and stay in the meat market. In addition, the administration inquired into
"price-fixing" in the chicken-processing industry already.
Of course, there are some resistances to the government regulations
from the meat-processing industry. The major processors say the administration
is "scapegoating" them and has misunderstood the
"fundamentals" of the market. Besides, they claimed that the rising
prices are not due to consolidation, but labor supply issues that led to the
decreasing abilities of meat processing factories to operate at a full
capacity.
Credit: https://www.bbc.com/news/business-58659478
3 comments:
I wonder how supply chain issues are affecting the rising beef prices as well. Are these meat companies keeping up with demand in terms of slaughtering and delivering the prepared meats to stores around the world?
It is interesting to see so much government involvement in this industry, and yet there are big problems with the market. There seems to be a failure of competition, and despite the government stepping in to help there has been no noticeable difference made. Also, I find it hard to believe that only these giants are major contributors to the market. When thinking of livestock, I do not see how economies of scale could have such a large impact when the majority of the costs to raise livestock are fixed.
It would be interesting to take a look at why livestock prices fell. Could it possibly be due to over reproduction of livestock in attempt to meet demand by those trying to hoard food for the pandemic or could it just be price moving down to meet the supply and demand of the livestock. Ultimately I can see benefits off this being the obvious of boosting the economy but on the other hand, one could argue that if livestock prices are low because of over-reproduction then we could argue concerns in relation to whether forcing reproduction at that rate is ethical or not and what affects it has on the population of the animal as a whole.
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