Firing Back at Packers: Meatpacking industry under the microscope of House Ag Committee
The chief executives of U.S. meatpackers Cargill, Tyson Foods, JBS, and National Beef Packing testified before the U.S. House Agriculture Committee. Chairman David Scott said it’s an examination of price discrepancies, transparency, and alleged unfair practices, including allegations the four corporations colluded to drive up beef prices.
“Each of you have said that, ‘No,’ and you all deny that you acted improperly or illegally. But none of you has been able to explain this meat margin chart and why your shares kept rising since 2015.”
When asked why their companies have made record profits while ranchers are finding it difficult to make ends meet, most said it’s an economic issue that’s out of their control.
“In our business, unprecedented market shocks have created extraordinary strain across our operations and the global supply chain. This has reduced our ability to produce beef at sufficient quantities to meet record-high consumer demand. Starting in early 2020, the pandemic impacted our ability to operate our production facilities at full capacity. This was due in part to protocols we put in place to keep team members safe. In our beef business, these factors made it difficult to process all cattle available on the market. This drove down the demand and prices for live cattle. At the same time, demand for beef skyrocketed as restaurants closed and Americans started cooking more meals at home. Simply put-- production could not meet the consistently strong demand,” Don King, CEO of Tyson foods, explains.
The first two and half hours of the hearing the congressional panel heard from ranchers. Coy Young is a Missouri cattle producer. He has shared his story of seriously considering suicide as a way out of the increasingly difficult cattle business and his inability to make a consistent profit.
“The American cattle farmers and ranchers are tired. Tired of being taken advantage of and losing money year after year while watching the big four have record profits every single quarter. The packers have manipulated the system with their alternative marketing agreements or arrangements... but the huge corporate-owned feedyards that control 87% of the fed beef in this country. AMA’s have killed the cash market and competition within the beef industry, making the markets the cow/calf producers have to compete in so depressed for the times, bankruptcy rates continue to be on the rise, and were at a ten-year high in 2019.”
Since the 1980s, the four largest meatpackers have used a wave of mergers to increase their share of the market from 36 percent to 85 percent, according to the U.S. Department of Agriculture. Now, all sides are trying to figure out how to move forward. Packers believe it is all cyclical and the tide will turn back to the cattle producers making a profit.
“Cattle prices today are up 45% up from where they were in the depth of COVID. Beef prices are down about 60% from that same time period. So, we had that anomaly during COVID that drove this, but the biggest factor we have today is oversupply of cattle relative to industry capacity. But that’s changing, and we’re already seeing it change. As we look forward from here, we’re going to see cattle prices go up and we’re going to see the beef profit for packers go down. The profits going to shift back to the cattle production segments.”