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Don’t Make Meat Cheaper. Make It Much More Expensive

On December 21, 2021, the attorneys general of 16 states, including agricultural powerhouses like Iowa and Minnesota, sent a letter to Secretary of Agriculture Tom Vilsack and his fair-competition czar, senior adviser Andrew Green. In it, they called on the U.S. Department of Agriculture to enforce the Packers and Stockyards Act, initially passed in 1921 to check rampant market manipulation and fraud in the meat industry. The timing of the letter wasn’t accidental. A White House analysis released earlier that month showed that the profits of the country’s biggest meatpackers has soared 300 percent. Attacking Big Meat now slots into the Biden administration’s increasing focus on antitrust in the face of rising inflation: The White House seems to hope that cracking down on corporate concentration can rein in runaway food prices on consumer goods like meat, winning goodwill before November’s midterm elections. Now its plan for that has become clear. On Monday, the White House announced a $1 billion investment aimed at promoting fair competition in the meat industry, with a focus on expanding the processing capacity of smaller and independent slaughterhouses and cracking down on violations of competition laws. 

Attacking the meat oligopoly has its economic and political virtues. America’s major meat processors regularly jack up prices, expose workers to heinous working conditions—and, most recently, to Covid-19—and profit from widespread animal cruelty. But $1 billion just to stimulate competition against them from smaller firms is both not enough and far too much.

The White House plan assumes that the main problem with big meat companies is their size; more numerous, smaller processing companies would therefore be better, providing the same quantity of the same products, more reliably, and at lower prices. But, on the one hand, there is no guarantee that even a billion dollars can stimulate that sort of change in the meat market absent much stronger regulatory crackdowns on the multibillion-dollar meat giants. On the other, it is far from clear that what the U.S. needs is more meat companies given its ostensible commitment to meeting climate targets. If anything, the administration should focus on policies that would force the meat industry to pay the full price for the environmental and public health problems it causes. But accounting for these so-called externalities would mean making meat far more, not less, expensive.

The American meat industry is more concentrated today than when the Packers and Stockyards Act was passed 100 years ago. Then, five huge companies controlled upward of 70 percent of the meat market. Today, the top four processors in beef, pork, and chicken control, respectively, 85, 70, and 54 percent of their markets. Processors like Tyson and Cargill are middlemen: They sometimes own their own farms, but more often they buy live animals from farmers, slaughter them, process them into cuts like bacon or burgers, and sell those to restaurants or retailers or export them.

When only four companies play this role in huge industries, this gives them tremendous leverage over both regulators, such as the USDA, which are supposed to keep them in check, and over the entire meat value chain from farm to supermarket. For farmers, this leads to a monopsonistic relationship, where most animals are not sold on the open market but through direct contracts with processors, who can impose low prices and force high debt in relationships that have been compared to sharecropping. For retailers and consumers, this can mean higher prices completely unrelated to higher production costs. Major processors like Smithfield, JBS, and Tyson are regularly sued for alleged price-fixing and even for using complex software to facilitate collusion on prices. They are frequently forced to pay multimillion-dollar settlements. In 2016, one lawsuit alleged that price-fixing by the chicken industry alone costs the average American family over $300 per year. (The industry has disputed that it colludes on prices, attributing recent price spikes to increasing input prices, supply chain bottlenecks, and both labor shortages and higher wages paid to incentivize workers back into abattoirs.) Consolidation also gives processors massive leverage over their poorly paid workers. Giant, centralized slaughterhouses operate at breakneck speeds and are hazardous workplaces, but with minimal government regulation and few unions, processors rarely feel pressure to improve wages or working conditions. Farmers, workers, and consumers looking to do business with kinder, gentler meatpackers have few options to choose from, and they’re all terrible.

Read entire article at The New Republic