Fighting consolidation: US funding ramps up markets to move away from meat monopoly

04 Nov 2022 --- The US government is strengthening its crackdown on combatting corporate concentration in the meat sector, with a US$375 million cash injection. In the first round of investments, authorities will put US$73 million on the table for 21 meat and poultry processing expansion program grant projects designed to help local producers and move away from just a handful of meat giants running the sector.

“Part of US Department of Agriculture (USDA) and the Biden-Harris Administration’s goal of transforming the food system is to combat market dominance and help producers and consumers gain more power in the marketplace by creating new, more and better local market options that provide producers more income opportunities and afford consumers more choices to buy fresh, locally produced products,” a USDA spokesperson tells FoodIngredientsFirst.

“USDA believes a shortened supply chain from farm to fork is a win-win for producers and consumers and will help create a more resilient food supply chain that provides more and better market options for consumers; creates a fairer food system that to make nutritious food more accessible and affordable for consumers; and emphasizes equity by creating more economic opportunities for communities and allow them to retain more of the food system dollar.”

The new grants will give more opportunities and resources to some communities over others, such as rural ones.

Four big processors control the majority of the US meat sector Tyson Foods, JBS, Cargill and National Beef2022 anti-monopoly year
The USDA affirms that the investments will increase processing capacity, support producer incomes, strengthen food supply chains, lower costs for families and create jobs in rural areas.

Four big processors control the majority of the US meat sector Tyson Foods, JBS, Cargill and National Beef (controlled by Brazilian company Marfrig).

“In too many industries, a handful of giant companies dominate the market. And too often, they use their power to squeeze out smaller competitors and stifle new entrepreneurs, making our economy less dynamic and giving themselves free rein to raise prices, reduce options for consumers, or exploit workers,” explains Biden.

“Four big corporations control more than half the beef, pork, and poultry markets. Without meaningful competition, farmers and ranchers don’t get to choose who they sell to. Or put another way, our farmers and ranchers have to pay whatever these four big companies say they have to pay.”

Concerns are growing that US meat giants can use their position and power to control prices. These fears are further stoked as the global cost of living continues to bite. 

According to the Federal Trade Commission, antitrust laws protect “the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.”

Since the start of the efforts to diversify the food system and rein in meat prices early this year, prices for meat – as for most commodities – have shown mixed signals. 

According to the USDA, wholesale poultry prices are predicted to increase between 19% and 22% in 2022 due, in part, to the Avian Flu crisis. For pork, prices are expected to go up between 8.5% and 9.5% this year. 

Beef prices have sunk 23% this year (compared to September 2021), partially due to particularly high prices of beef last year – with beef prices being 21.6% higher than the average 2020 price.

Meat giants capitalize on price increasesIn a complex year for consumers due to food inflation (CPI up 13% from a year ago), US meat giants have managed to turn around profits for shareholders.
In a complex year for consumers due to food inflation (CPI up 13% from a year ago), US meat giants have managed to turn around profits for shareholders.

Tyson Foods sales are up to US$39.55 billion in the year (from US$34.24 billion in 2021) despite the volume of sales decreasing by 1% – Q3 earnings data from the first nine months of the year showed. The meat giant has generated an extra US$2.5 billion just from poultry sales, despite a meager increase in volume sold by 0.7%, capitalizing on price increases.

Similarly, in the last 12 months, Marfrig has sold 3.8% more meat in the North American market while generating 25.4% more revenue. Its gross profit is up 46.6% from a year earlier – according to the business Q2 results.

In the last 12 months for JBS, gross profit for its pork division is up by 11.3% and for its beef division by 19.3%.

USDA investment goals
The USDA flags that this is a multi-pronged initiative to transform the US food system into a more decentralized and resilient system.

One of its pillars is strengthening local and regional food systems and restoring jobs in rural places. With this goal in mind, the program is funding cooperatives to support independent producers. 

Authorities are also restoring jobs in rural areas, purchasing a shuttered poultry plant in Iowa and funding growers in Minnesota, Wisconsin and Iowa to create jobs in rural communities.

Furthermore, strengthening local and regional food systems with investments like a livestock slaughter and processing plant in the state of Vermont.

Moreover, to build processing capacity and reduce barriers to processing, the Biden administration is investing in the Cutting Edge Meat Company, a facility in Mississippi that provides pork and beef processing for producers in that state, Alabama, Louisiana and Florida. 

Concerns are growing that US meat giants can use their position and power to control prices. “With this investment, they will significantly increase their capacity and shorten the six-month backlog for processing currently facing producers,” explains the USDA.

In Omaha, a new beef processing plant with the capacity of processing 700 heads per day will also be built.

USDA also wants to empower family-owned businesses, particularly destining funding for immigrant communities.

Corporate domination
Few players dominate the market for US meat, however, corporate concentration spreads across the food chain.

According to a report by the ETC Group, Only a handful of companies dominate the growing agri-food industry. The research maps corporate power in Big Food, revealing that many agri-food sectors are now so “top-heavy” they are controlled by just four to six dominant firms.

This has prompted the USDA to keep announcing investments this year – furthermore strengthening rules under the Packers and Stockyards Act – and spearheading new initiatives to support fair and competitive meat and poultry markets.

Moreover, corporate concentration in the baby formula market led to massive shortages this year in the US when one of its major players, Abbott, was forced to shut down its facility after four infants were hospitalized and two died.

By Marc Cervera