Rising Beef Prices Are Under Investigation By the USDA and Justice Department
Has the coronavirus exposed over-consolidation in the meatpacking industry?
The current state of America’s beef market can be tough to wrap your head around. On the consumer end of the supply chain, worries about meat shortages have led many supermarkets to put restrictions on how much customers can buy. (For instance, as of today, Costco still has a three-item limit on all beef, pork, and poultry purchases.) But on the other end, farmers are stuck with so much excess supply that one company was literally giving away $60 American Wagyu steaks to charity.
The disconnect is the middlemen, and in the middle of a pandemic, they’re facing plenty of difficulties, too. Looking specifically at the path beef takes to grocery stores, meat processing plants were especially hard hit by the coronavirus, causing many of these facilities to operate at reduced capacity or temporarily shut entirely. As a result, beef prices surged in April despite surpluses driving down the price of cattle.
Ideally, these sort of supply and demand issues should balance themselves out; the fact that they aren’t is leading to scrutiny of the meatpacking industry—pandemic or not. Yesterday, Politico reported that both the Department of Justice and the USDA are looking into whether the four biggest meat companies—Tyson Foods, JBS, National Beef, and Cargill, which collectively control 85 percent of the beef market—are fixing or manipulating prices. “It’s evidence that something isn’t right in the industry,” Iowa Senator Chuck Grassley was quoted as saying about the current pricing discrepancy. He’s one of 20 senators and 11 state attorneys general said to have called for government investigations.
As reporters Leah Nylen and Liz Crampton point out, the issue isn’t entirely about whether the industry is doing anything wrong right now, but also how we’ve found ourselves in this situation. A coronavirus-caused bottleneck can explain why prices have gone wonky on either end, but part of the problem is that we have a bottleneck at all. Politico explains that, one hundred years ago, five companies—called “the Big Five”—controlled 82 percent of the beef market, leading to an antitrust settlement. “There’s greater concentration in meatpacking now,” Thomas Horton, an antitrust professor at the University of South Dakota, told the site. “Now we have the Big Four. We’re going backwards.”
As a result, even if staff shortages due to COVID-19 explain what’s happening in the beef market, some argue that the coronavirus may have exposed a deeper flaw: Too few companies control too much of our meat supply.