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White House focuses on meat supply chain challenges

White House Promoting competition roundtable.jpg
TALKING PRICES: President Joe Biden was joined by USDA Secretary Tom Vilsack and Attorney General Merrick Garland and five farmers on January 3, 2022 to discuss competition issues in the meat industry.
Biden administration lays out action plan to address competition in marketplace and holds roundtable featuring farmers.

President Joe Biden met virtually with family and independent farmers and ranchers to discuss his administration’s work to boost competition and reduce prices in the meat-processing industry, where the administration claims corporate consolidation has led to rising prices for consumers and lower earnings for farmers and ranchers.

In an event Biden hosted at the White House Monday afternoon, Attorney General Merrick Garland, Secretary of Agriculture Tom Vilsack, and Brian Deese, director of the National Economic Council joined five farmer representatives: Corwin Heatwole, CEO of Farmer Focus; Scott Blubaugh, president of the Oklahoma Farmers Union; Kelsey Ducheneaux-Scott, director of programs at the Intertribal Agriculture Council; Brent Johnson, president of Iowa Farm Bureau Federation; and Handy Kennedy Jr., owner of HK Farms.

In his opening comments, Biden shared a kitchen table conversation the day prior with his wife and her sister discussing the rising costs of hamburger at over $5/pound, compared to $4/lb. prior to the pandemic. In adding historical context, Biden shared that over 50 years ago, a rancher received 60 cents for every food dollar spent on beef. Today that is down to 39 cents per dollar of beef that goes to the rancher. Hog farmers have seen a similar drop he says from 40 to 50 cents for each dollar 50 years ago, to about 19 cents today.

cattle prices vs wholesale White House.jpg

Focus on market concentration

Biden notes as prices at the grocery stores go up, the prices farmers receive for the products they are bringing to the market go down.

“This reflects the market being distorted by lack of competition. I've said it before, and I'll say it again. Capitalism without competition isn't capitalism, it's exploitation. That's what we're seeing in meat and poultry,” as now small, independent farmers and ranchers are being driven out of business, Biden explains.

At the event, the Department of Justice and USDA announced a new joint initiative to better coordinate their efforts—including launching within 30 days a new portal for reporting concerns about potential violations of the competition laws. The event also reinforced efforts to strengthen the Packers & Stockyards Act. The President’s Executive Order on Promoting Competition established the White House Competition Council to coordinate a “whole of government approach” to promoting competition.

Garland notes, “When we talk about promoting competition in the agricultural sector, we are talking about whether a farmer or a rancher will be paid a fair and competitive price for their goods and labor. When we talk about protecting consumers in this context, we are talking about whether food will be affordable for everyone in America. The justice department's antitrust division has been active in implementing the sound policy measure suggested in the president's executive order on promoting competition in the American economy.”

Garland says the online portal will allow for a one-stop-shop to report complaints of potential violations of the competition laws including the Sherman and Clayton Act as well as the Packers & Stockyards Act.

American Farm Bureau Federation President Zippy Duvall says these actions “will go a long way to ensuring fairness in the industry.”

Garland adds, “Too many industries have become too consolidated over time. Too many companies have pursued corporate conduct and more aggressive mergers that have made all of us vulnerable. Against this background our antitrust efforts cannot and will not slow down, but it is a fact that our antitrust division has been underfunded for too long and has fewer staff today than it had in the 1970s,” he says in urging Congress to allocate more resources to reinvigorate enforcement efforts.

The action plan offers increased whistleblower protection for farmers and ranchers who report market abuses to DOJ and USDA.

Adding meat processing capacity

The action plan unveiled Monday provides more insight and direction to the $1 billion approved by Congress in the American Rescue Plan funds in early 2021 designated for expansion of independent processing capacity.

USDA will provide gap financing grants totaling up to $375 million for independent processing plant projects that fill a demonstrated need for more diversified processing capacity.  USDA will publish a Request for Proposals for Phase I of this initiative this spring. Phase I will invest approximately $150 million to jump-start an estimated 15 projects, focused on deploying financial support for projects with the greatest near-term impact. USDA will deploy an additional $225 million to support additional projects in Phase II, which will open in summer 2022.

To address the credit access gap, USDA will deploy up to $275 million in partnership with lenders that will, in turn, provide loans and other support to businesses at rates and on terms that increase access to long-term capital.

USDA says it will invest an estimated $50 million in technical assistance and research and development to help independent business owners, entrepreneurs, producers, and other groups, such as cooperatives and worker associations, create new capacity or expand existing capacity.

During the event, Vilsack also explained that USDA is working on a voluntary label program called the “Product of the USA” to allow consumers to know exactly where their consuming dollars are being spent.

Labor challenges in meat industry

Vilsack notes, “Even if we build more facilities, we also need to train workforce.” The plan dedicates $100 million to support development of a well-trained workforce, safe workplaces and good-paying, quality jobs by working closely with partner organizations, including labor unions, with expertise in workforce development and worker health and safety.

Julie Anna Potts, president and CEO of the North American Meat Institute, says the roundtable as well as this administration’s efforts fail to recognize the number one challenge to meat and poultry production: labor shortages. “This tired approach is not surprising because they have refused to engage with the packing and processing sector they attack, going so far as to hold a roundtable on meat packing without a single beef or pork packer present,” Potts says.

Sarah Little, Meat Institute spokeswoman, adds, “Our members of all sizes cannot operate at capacity because they struggle to employ a long-term stable workforce. New capacity and expanded capacity created by the government will have the same problem.”

“Press conferences and using taxpayer dollars to establish government-sponsored packing and processing plants will not do anything to address the lack of labor at meat and poultry plants and spiking inflation across the economy,” says Potts. “The administration wants the American people to believe that the meat and poultry industry is unique and not experiencing the same problems causing inflation across the economy, like increased input costs, increased energy costs, labor shortages and transportation challenges. Consumers know better.”

Little adds that the market has already begun to balance itself. “All of the government spending announced again today is too late for consumers and producers. According to USDA data, cattle producers are getting the highest prices on record since record prices they received in 2014. This is because packers have begun to clear the backlog of cattle created by the pandemic. The herd size is shrinking while demand remains high.

Bipartisan legislative fix to cattle markets

Biden welcomes the bipartisan legislative proposals spearheaded by Senators Chuck Grassley, R-Iowa, and Deb Fischer, R-Neb., as well as Jon Tester, D-Mont.

Biden adds, “A free market isn't truly free without transparency around prices. How do you justify the price? And right now, that's largely disappeared in the cattle market.” The legislative proposals require greater transparency from meat packers on the prices they pay to producers and mandate a certain level of cash market sales.

“We are encouraged by the administration’s willingness to work with lawmakers on both sides of the aisle to improve price discovery in the cattle markets. We urge bipartisanship throughout this process,” Duvall says. “Securing fair prices for farmers and for families is a goal that transcends party lines.”

 

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