April 29, 2022

 

CEOs of major beef meatpackers deny market manipulation is behind rising beef prices

 

 

The CEOs of four major meatpacking corporations denied working together to control beef supplies or prices, defending themselves against claims of profiteering at a US congressional testimony, Bloomberg reported.

 

Resentment towards the meat industry's strong market position have erupted into a larger political discussion, as increasing inflation has become the public's top concern, and meat prices have become talking point. Beef prices increased 16% year-on-year in March, beating the overall 8.5% inflation rate, which was the highest in four decades.

 

US President Joe Biden and several Democrats in Congress have painted the four meatpacking corporations as economic criminals, claiming that they are profiting from the COVID-19 pandemic and supply-chain problems by leveraging their market share.

 

David Scott, a Georgia Democrat and the Chairman of the House Agriculture Committee, began the meeting by asking each of the CEOs to raise their right hands and vow to speak the truth, a formality that legislative hearings sometimes overlook. He questioned them if their firms had ever formed a deal to inflate meat prices or influence supply.

 

He presented them with a graph that shows an increasing gap between the cost meatpackers pay for cattle and the wholesale rates they receive for meat, which has significantly rose since 2015.

 

When asked about pricing manipulation, each CEO responded with a "No" or "Not that I am aware of."

 

The denials are noteworthy since corporations like Tyson and JBS have been involved in price-fixing scandals involving chicken and pork that have resulted in class-action lawsuits and an antitrust probe by the US Justice Department. Hundreds of millions of dollars in penalties and settlements have already been paid by the firms.

 

Donnie King, CEO of Tyson Foods, said the increase in packer margins is partially attributable to the cattle market cycle, in which higher cattle prices in 2014 led to an expansion of herds, which subsequently pushed down livestock prices.

 

He said the rise in consumer beef prices since the pandemic, which has gotten a lot of attention, is due to "straightforward market factors."

 

King said neither the animals they acquire nor the meat our clients purchase are priced by Tyson. Instead, supply and demand set the pricing.

 

Tyson Foods recorded a 19% profit margin in its beef business in its most recent quarterly results, up from 13% a year ago. The company said margin levels will return to more typical levels later this year.

 

Dave MacLennan, CEO of Cargill, said higher beef prices are due to labour restrictions, transportation issues, and increased feed costs.

 

Tim Klein, CEO of National Beef Packing Co., said production slowdowns and manpower constraints during and soon after the pandemic resulted in a production backlog of nearly one million cattle. He said cattle prices were badly impacted throughout 2020 and most of 2021 before being cleared.

 

Cattle producers' share of the prices consumers pay for beef has just risen, up to 39% in March from 31% in June 2020, when huge Covid-19 infections delayed meatpacking operations in the early stages of the pandemic. According to data from the US Department of Agriculture (USDA), farmers' share has remained far below pre-pandemic levels, ranging from 60% in 1990 to 43% in 2019.

 

According to the USDA, Tyson Foods, Cargill, National Beef, and JBS SA, whose USA Holdings CEO Tim Schellpeper also testified, killed 85% of grain-fattened cattle used for steaks, roasts, and other kinds of meat for customers in 2018.

 

Julie Anna Potts, president and CEO of the North American Meat Institute, said if US Congress makes radical changes to laws governing cattle or beef, it could upend the markets and increase prices for the whole supply chain, including for consumers.

 

-      Bloomberg