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White House: Concentration in meat packing affecting inflation

Legislative Watch: Gas, energy prices up nearly 60%; Spot Market Hog Pandemic Program; FAS funds agricultural trade programs; Congress raises debt limit.

P. Scott Shearer

December 17, 2021

4 Min Read
meat processing packing plant USDA FDS.jpg
USDA

Inflation is becoming a political liability for President Joe Biden. It is becoming a key issue for the American public as they continue to experience increased prices at the gas pump, grocery store and medical expenses. Inflation rose last month at the fastest rate in 39 years with the consumer price index increasing 6.8% in November.  

The administration is saying that concentration in the meat packing industry is one of the major reasons for the rise in inflation.

Last Friday, the White House Economic Council in a blog said the increase in food prices besides supply chain issues, bottlenecks and shutdowns from the pandemic there was due to another culprit: "dominant corporations in uncompetitive markets taking advantage of their market power to raise prices while increasing their own profit margins. Meat prices are a good example."  

The White House studied the latest quarterly earnings statements of the four largest meat processors (Tyson, JBS, Mafrig owner of National Beef and Seaboard) and said "their grosss profits have collectively increased by more than 120% since before the pandemic, and their net income has surged by 500%."

Biden said on Tuesday in an interview with WHIO-TV in Dayton, Ohio,  "I'm urging the Congress to hold hearings as to the concentration of power in a few hands controlling the food processing side of the equation." 

The North American Meat Institute (NAMI) said the White House was trying to shift the blame for meat inflation onto the meat and poultry industries. NAMI said, "The White House Economic Council is again demonstrating its ignorance of agricultural economics and the fundamentals of supply and demand. This argument is simply a rinse and repeat of their September attempts to blame meat and poultry companies for inflation that is not limited to food, but is being felt across the economy.

"This cherry picking of data is obvious to all. It is no coincidence this blog post appears on the same day as the Consumer Price Index is released showing gas and energy prices are up nearly 60% over the past 12 months which is nearly 10 times the rate of inflation for food.

"The Economic Council continues to insist market structure is the reason for higher consumer prices of meat and poultry. In beef production for example, the same four firm concentration ratio has been operating in the market for nearly 30 years. Why the sudden inflation?"

USDA announces more pandemic assistance for pork producers
The USDA Farm Service Agency (FSA) announced it was making available $50 million for the new Spot Market Hog Pandemic Program (SMHPP). SMHPP will provide assistance to producers impacted by the COVID-19 pandemic who sold hogs through a negotiated sale from April 16, 2020 through Sept. 1, 2020. The payment rate is $54 per head and can not exceed 10,000 head.

Applications were being accepted beginning Dec. 15. Additional information and eligibility can be found here.

FAS funds agricultural trade programs 
The USDA's Foreign Agricultural Service (FAS) announced its funding awards for the Market Access Program (MAP) and Foreign Market Development Program (FMD). There are 67 organizations receiving $175.6 million in MAP funding and 21 organizations receiving $26.8 million in FMD funding.

The top five recipients of MAP funding were the Cotton Council, U.S. Meat Export Federation, Food Export Association of the Midwest USA, American Soybean Association and U.S. Grains Council. The top five recepients of FMD funding were the American Soybean Association, Cotton Council, U.S. Wheat Associates, U.S. Grains Council and American Hardwood Export Council. 

The MAP focuses on product promotion and FMD creates, expands and builds long-term export markets. An independent study in 2016 found that MAP and FMD provide $28 in export gains for every $1 spent by government and industry on market development.

Congress raises debt limit
Congress raised the debt limit by $2.5 trillion. This will give the Treasury Department enough borrowing authority to make it past the midterm elections and into 2023.

If Congress failed to raise the debt limit, the Treasury Department would have had to prioritize which financial obligations would be paid. Secretary of the Treasury Janet Yellen has been telling Congress that if the debt limit was not raised by Dec. 15 some payments would be missed. A number of economists have said not raising the debt limit could lead to a recession.

About the Author(s)

P. Scott Shearer

Vice President, Bockorny Group, Inc.

Scott Shearer is vice president of the Bockorny Group Inc., a leading bipartisan government affairs consulting firm in Washington, D.C. With more than 30 years experience in government and corporate relations in state and national arenas, he is recognized as a leader in agricultural trade issues, having served as co-chairman of the Agricultural Coalition for U.S.-China Trade and co-chairman of the Agricultural Coalition for Trade Promotion Authority. Scott was instrumental in the passage of China Permanent Normal Trade Relations and TPA. He is past chairman of the USDA-USTR Agricultural Technical Advisory Committee for Trade in Animals and Animal Products and was a member of the USAID Food Security Advisory Committee. Prior to joining the Bockorny Group, Scott served as director of national relations for Farmland Industries Inc., as well as USDA’s Deputy Assistant Secretary for Congressional Affairs (1993-96), serving as liaison for the Secretary of Agriculture and the USDA to Congress.

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