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Report: ‘Concentration’ not to blame for higher pork prices

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Economists say strong demand, higher input costs and labor shortages contributing.

Retail meat prices in the U.S. increased rapidly in 2021, drawing the attention of consumers and policymakers alike. As of December 2021, pork prices were up 15.1% year over year
while beef and chicken prices were up 18.6 and 10.4%, respectively, based on the Bureau of Labor Statistics Consumer Price Index (CPI). Much scrutiny has centered on concentration in the meatpacking industry,  but a new report issued today by economists at Iowa State University, North Carolina State University, and the National Pork Producers Council found that pork prices have actually risen because of strong demand for U.S. pork, higher input costs and labor shortages throughout the supply chain. The report’s authors, Iowa State’s Dermot Hayes, NC State’s Barry Goodwin and NPPC’s Holly Cook, also found that pork prices in the U.S. are still lower than in many other countries.

The pork packing industry is made up of fewer and larger plants than it was 50 years ago, but the structure of the industry has changed little in recent decades, the report stated, and concentration levels today are about 7% lower than they were five years ago because of new packing plants that opened from 2017 to 2020. Four of those five plants are at least partially producer-owned. In fact, more than 100 industries had a greater concentration level, according to a commonly used calculation, the report noted.

“This report shows the concentration level in the pork packing industry is not significantly higher than it was 15 years ago,” said NPPC President Jen Sorenson. “The recent increase in pork prices is driven by strong pork demand, rising input prices, higher wages and supply chain bottlenecks throughout the industry.”

The report also found no evidence that significantly higher profits are being captured at the wholesale level during this time of higher retail prices. The farm-to-wholesale price spread – which consists of packers’ costs and profits – has been shrinking while the wholesale-to-retail spread has increased over the past six months. Packer gross margins also are estimated to be within their 5-year average range, according to the report.

“Although pork prices have risen rapidly in recent months,” said Iowa State’s Hayes, “retail and carcass prices in the U.S. are still relatively low when compared with prices in other countries.”

“Americans pay less for pork, not more than consumers in most other nations,” Sorenson said. “That includes big pork-producing countries such as Canada, Denmark and Germany.”

To read the report, click here.


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