Farmers’ organizations react to Biden’s meat plan

On Monday afternoon, President Joe Biden held a virtual meeting with smallholder farmers and independent ranchers to discuss solutions to the rising meat prices resulting from what he sees as a lack of competition in the packaging industry. meat. Along with the meeting, the White House released a backgrounder detailing the administration’s plan to address these issues.

“Over the past few decades, we’ve seen too many industries become dominated by a handful of large corporations that control most of the business and most of the opportunity, raising prices and decreasing options for American families, while removing small businesses and entrepreneurs, ”reads the White House fact sheet.

The president cited the meat packaging industry as what the statement called “a classic example” of this lack of competition, saying that the four largest companies in the beef packaging industries, poultry and pork control between 54 and 85 percent of the market, pushing up prices for consumers and crowding out small independent producers by lowering prices for them.

Glynn Tonsor, professor of agricultural economics at Kansas State University, however, said recent research by agricultural economists does not support the hypothesis that the beef industry is driven by uncompetitive pricing. . Citing recent studies, Tonsor noted that the conduct of transformers during the pandemic was, from an economic point of view, “no different from perfect competition.”

And while agricultural organizations across the region support the president’s efforts to address these issues, officials say solutions may not go far enough to address what they see as a much more complicated problem.

“More generally, it is important to recognize that the prices of any good, including cattle and beef, are a function of the forces of supply and demand,” Tonsor said. “There are many forces of supply and demand at play in today’s complex industry. The high demand for meat (both at home and abroad in our globally connected market) is itself driving up meat prices. Meanwhile, economists routinely find that the high costs of converting live animals into edible meat products lead to lower livestock prices (via reduced derivative demand) and higher meat prices.

Kansas Farm Bureau president Richard Felts also said the answer is more complex.

“Right away, I don’t think there is a short, precise answer,” Felts said. “All the things we need to do (to make competition stronger), we just don’t have the capacity – and the manpower – to do what we need to do.”

Part of the president’s plan includes $ 375 million in funding grants from the United States Department of Agriculture (USDA) to support small independent processing plant projects, with the aim of helping small independent producers to increase competition in the meat packaging industry. This includes providing additional capital to lenders who lend to small independent producers and distributors.

Biden’s plan also seeks to improve oversight of large processors by strengthening enforcement of the 1921 Packers and Stockyards Act.

The president also wants to strengthen and clarify the labeling requirements for products.

“Under current labeling rules, meat can be labeled” Product of the United States “if it is only processed here, including when the meat is raised overseas and then simply processed into pieces. meat here, ”the statement noted. “We think this might make it difficult for American consumers to know what they are getting.”

This makes it more difficult for domestic producers to sufficiently compete with foreign producers who do not have to be transparent with their labeling and prices.

“The predominance of opaque contracts and insufficient competition undermine price discovery and fairness in independent livestock markets, which ultimately lock producers into prices that are not the product of free negotiation and fair, ”the press release noted.

Felts said the plan does not go far enough to address what he sees as a key part of the current supply chain bottleneck.

“You can have some relief there, but when you look at the number and scale of the number of animals that we have that are being treated, one wonders, especially on the small end, if this is going to help. mitigate demand as much, ”Felts said.

While the president’s plan also seeks to address labor shortages, and Felts said the agriculture industry is supporting these efforts to build and train additional labor, Felts said it takes a long time to build and properly train a skilled workforce.

Since much of the funding goes to small processors, he said, the plan will not solve the labor issues that also plague large facilities, which contribute to the bottleneck of supply.

“We just don’t have enough manpower available in these large processing plants to operate at their optimum or maximum capacity,” Felts said. He added that some in the industry consider that supporting small independent producers without also supporting existing producers actually hinders competition and may in fact worsen the bottleneck. At present, he said, the processing capacity at all levels is not sufficient to meet consumer demand.

“Supply and demand intersect in a significant way, and when you have an overabundance of product to deal with and a limitation of that process, and you have good demand, it creates a lot of disparity,” Felts said.

KFB, he noted, supports increasing opportunities for all producers to market their products.

Felts, however, sees some potential relief on the horizon for farmers and consumers from the president’s plan.

Tonsor observed that the plan’s potential effectiveness will be determined by how it is implemented.

“The impact of any proposed action ultimately depends on the details of how things are implemented,” Tonsor said. “Here, the exact timing, location and duration of federal resources added to the processing sector will determine any impact achieved.”

“Farmers are going to be able to expect more opportunities to market their product, and I hope the consumer can see some relief in the prices,” Felts said.

The full plan of the White House is available here.

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