President Biden to Spotlight Challenges in Livestock Markets, Meatpacking Industry

OMAHA (DTN) — President Joe Biden will start 2022 highlighting what the White House sees as unfair market practices by the largest meatpackers and detailing plans to diversify the meatpacking industry while increasing enforcement over anti-trust practices.

The White House announced Biden will meet virtually with “family and independent farmers and ranchers” on Monday as the administration rolls out a plan to “boost competition and reduce prices in the meat-processing industry.” The White House points to “corporate consolidation” that “has led to rising prices for consumers and lower earnings for farmers and ranchers.”

Biden, Agriculture Secretary Tom Vilsack and Attorney General Merrick Garland will announce what they are calling “the Biden-Harris Administration’s Action Plan for a Fairer, More Competitive, and More Resilient Meat and Poultry Supply Chain.”

Plans detailed by the White House likely will not sit well with the country’s largest beef and pork packers — Tyson, JBS, Smithfield, National Beef, Cargill — as the packing industry has claimed that “black swan” events such as the pandemic, labor problems and supply-chain challenges drove up prices for consumers and higher retail prices were not caused by a concentrated industry. In December, the North American Meat Institute criticized the White House Economic Council for a report looking to “shift blame for record food inflation to the meat and poultry industry.”

The plan rolls out a variety of meatpacking initiatives at USDA, plans to tighten up enforcement of the Packers and Stockyards Act (P&SA), and a strategy by USDA and the Department of Justice to “better coordinate” antitrust efforts.

Read more of this story from DTN/Progressive Farmer here: https://www.mydtn.com/agriculture/web/ag/news/article/2022/01/03/president-biden-spotlight-challenges-2

Read the full press release from the White House this morning (Monday 1/3) below:

FACT SHEET: The Biden-Harris Action Plan for a Fairer, More Competitive,  and More Resilient Meat and Poultry Supply Chain 

In July, President Biden signed an Executive Order on Promoting Competition in the  American Economy to create a fairer, more resilient, and more dynamic economy. Over  the last few decades, we’ve seen too many industries become dominated by a handful of  large companies that control most of the business and most of the opportunities— raising prices and decreasing options for American families, while also squeezing out  small businesses and entrepreneurs.  

The meat and poultry processing sector is a textbook example, with lack of competition  hurting consumers, producers, and our economy.  

Four large meat-packing companies control 85 percent of the beef market. In poultry,  the top four processing firms control 54 percent of the market. And in pork, the top four  processing firms control about 70 percent of the market. The meatpackers and  processors buy from farmers and sell to retailers like grocery stores, making them a key  bottleneck in the food supply chain. 

When dominant middlemen control so much of the supply chain, they can increase their  own profits at the expense of both farmers—who make less—and consumers—who pay  more. Most farmers now have little or no choice of buyer for their product and little  leverage to negotiate, causing their share of every dollar spent on food to decline. Fifty  years ago, ranchers got over 60 cents of every dollar a consumer spent on beef,  compared to about 39 cents today. Similarly, hog farmers got 40 to 60 cents on each  dollar spent 50 years ago, down to about 19 cents today.  

Even as farmers’ share of profits have dwindled, American consumers are paying more— with meat and poultry prices now the single largest contributor to the rising cost of food people consume at home.  

And, when too few companies control such a large portion of the market, our food  supply chains are susceptible to shocks. When COVID-19 or other disasters such as fires  or cyberattacks shutter a plant, many ranchers have no other place to take their animals.  Our overreliance on just a handful of giant processors leaves us all vulnerable, with any  disruptions at these bottlenecks rippling throughout our food system. 

Today, President Biden will meet with farmers, ranchers, and independent  processors from across the country to hear from them and to announce the  Biden-Harris Administration’s Action Plan for a Fairer, More Competitive, and More Resilient Meat and Poultry Supply Chain. The Action Plan includes 

four core strategies for creating a more competitive, fair, resilient meat and poultry  sector, with better earnings for producers and more choices and affordable prices for  consumers:  

The Biden-Harris Administration will dedicate $1 billion in American  Rescue Plan funds for expansion of independent processing capacity. USDA  reviewed nearly 450 comments received over the summer in response to its request for  input on how best to increase independent processing capacity. Through their analysis  of stakeholder input, USDA identified an urgent need to:  

• Expand and diversify meat and poultry processing capacity; 
• Increase producer income; 
• Provide producers an opportunity to have ownership in processing facilities; • Create stable, well-paying jobs in rural regions; 
• Raise the bar on worker health, safety, training, and wages for meatpacking jobs; • Spur collaboration among producers and workers; 
• Prompt state, tribal, and private co-investment; and 
• Provide consumers with more choices. 

To these ends, USDA has increased available funding and is releasing new program  details to support the meat and poultry supply chain. Specifically, the Biden-Harris  Administration will: 

Expand independent processing capacity: 

• Increase competition and create more options for producers and  consumers in the near-term by jump-starting independent processing  projects that will increase competition and enhance the resiliency of  the food supply chain. This new processing capacity will build momentum in  a currently concentrated market. For example, 50 beef slaughter plants owned by  just a handful of companies currently process nearly all the cattle in the United  States. USDA will provide gap financing grants totaling up to $375 million for  independent processing plant projects that fill a demonstrated need for more diversified processing capacity. 

o USDA will publish a Request for Proposals for Phase I of this initiative this  Spring. Phase I will invest approximately $150 million to jump-start an estimated 15 projects, focused on deploying financial support for  projects with the greatest near-term impact. USDA will deploy an  

additional $225 million to support additional projects in Phase II, which  will open in Summer 2022. USDA will also ensure these funds truly  expand capacity outside the largest meat and poultry processors, funding  only independent operations. 

• Strengthen the financing systems for independent processors. USDA  will work with lenders to make more capital available to independent processors  that need credit. To address the credit access gap, USDA will deploy up to $275 

million in partnership with lenders that will, in turn, provide loans and other  support to businesses at rates and on terms that increase access to long-term,  affordable capital. USDA will solicit applications from potential partners by  Summer 2022, with an initial focus on lenders that provide financing in  underserved communities. 

• Back private lenders that invest in independently owned food  processing and distribution infrastructure. From cold storage to  specialized equipment, building a more distributed and resilient food system  requires independent producers to have access to food processing and  distribution infrastructure that enables them to move their product throughout  the supply chain. To assist in the financing of this infrastructure, USDA has  deployed $100 million in American Rescue Plan funds, to make more than  $1 billion in guaranteed loans available immediately. Applications for these  guaranteed loans will be accepted until funds are expended; more information on  how to apply can be found here.  

Support workers and the independent processor industry 

• Build a pipeline of well-trained workers and support safe workplaces  with fair wages. New and expanded meat and poultry processing facility  capacity will create new job opportunities in rural communities. Building a well trained workforce and ensuring that meat and poultry processing jobs are safe  requires dedicated attention and investment. USDA will dedicate $100 million to support development of a well-trained workforce, safe workplaces, and good paying, quality jobs by working closely with partner organizations, including  labor unions, with expertise in workforce development and worker health and  safety. 
• Promote innovation and lower barriers to entry via publicly  accessible expert knowledge. Meat and poultry processing is a complex and  technical sector that requires strict adherence to a host of environmental, food  safety, and worker safety requirements. Creating new business models that  support both workers and producers is similarly complex and time-intensive. At  the same time, processors need access to new and emerging innovative practices  and technologies. USDA will invest an estimated $50 million in technical  assistance and research and development to help independent business owners,  entrepreneurs, producers, and other groups, such as cooperatives and worker  associations, create new capacity or expand existing capacity. 
• Provide $100 million in reduced overtime inspection costs to help  small and very small processing plants keep up with unprecedented  demand. With bipartisan support in Congress, USDA is reducing the financial  burden of overtime and holiday inspection fees for small and very small poultry,  meat, and egg processing plants, by 30 percent and 75 percent respectively,  which provide farmers and ranchers with local alternatives to process livestock 

and poultry.  

• In addition to the above investments from the American Rescue Plan, USDA has  made $32 million in grants to 167 existing meat and poultry  processing facilities to help them reach more customers by becoming  Federally inspected through the Meat and Poultry Inspection Readiness Grants Program. With this grant funding, meat and poultry  processing businesses can cover the costs for improvements, such as expanding  existing facilities, modernizing processing equipment, and meeting packaging,  labeling, and food safety requirements needed to achieve a Federal Grant of  Inspection under the Federal Meat Inspection Act or the Poultry Products  Inspection Act, or to operate under a state’s Cooperative Interstate Shipment  program. These changes will allow these facilities to serve more customers in  more markets. An additional round of funding for this program will be made  available through a forthcoming Request for Applications. 

The Biden-Harris Administration will strengthen the rules that protect  farmers, ranchers, and consumers. Specifically, in 2022, the Biden-Harris  Administration will: 

• Issue new, stronger rules under the Packers and Stockyards Act—the  law designed to combat abuses by the meatpackers and processors.  The law was systematically weakened by the Trump Administration USDA, and  in the Biden Administration, USDA has already begun work on three proposed  rules to provide greater clarity and strengthen enforcement under the Act. USDA  is also currently working with the Federal Trade Commission to prepare a report  on access to retail and competition’s role in protecting new market entrants in  meat processing. 
• Issue new “Product of USA” labeling rules so that consumers can  better understand where their meat comes from. Under current labeling  rules, meat can be labeled “Product of USA” if it is only processed here— including when meat is raised overseas and then merely processed into cuts of  meat here. We believe this could make it hard for American consumers to know  what they are getting. USDA has already begun its top-to-bottom review of the  current labeling rules and consumers’ understanding of the labels, with the goal  of new rulemaking to clarify “Product of USA” standards. 

It is the policy of the Administration to promote vigorous and fair  enforcement of the existing competition, and to ensure “all of government”  works together to promote competition: 

• Today, DOJ and USDA are announcing a new joint initiative to better  coordinate their efforts—including launching within 30 days a new  portal for reporting concerns about potential violations of the  competition laws. The President’s Executive Order on Promoting Competition  established the White House Competition Council to coordinate a “whole of 

government approach” to promoting competition. In furtherance of this  approach, Competition Council members USDA and DOJ will provide a new joint  channel for farmers and ranchers to report complaints of potentially unfair and anticompetitive practices in the agricultural sector to them—whether under the  Sherman and Clayton Acts or the Packers and Stockyards Act. This joint channel  will facilitate the agencies’ ability to work together based on a common  understanding of farmers’ and ranchers’ concerns. The agencies will protect the  confidentiality of the complainants to the fullest extent allowed under the law.  The agencies also announced their commitment to the strongest possible  whistleblower protections. DOJ and USDA further announced that they will  enhance their collaboration on referrals, information sharing, and identifying  areas of the law in need of modernization. 

The Biden-Harris Administration will work to increase transparency in  cattle markets so that ranchers can get a fair price for their work: 

• USDA is using its existing authorities to increase transparency to the  extent possible. Right now, meatpackers have outsized power in setting the  prices for beef. The dominance of opaque contracts and insufficient competition undermine price discovery and fairness in the independent livestock markets,  which ultimately lock producers into prices that aren’t the product of free and fair negotiation. In August, USDA began issuing new market reports on what beef processors pay to provide additional insight into formula cattle trades and help  promote fair and competitive markets. USDA is looking at what more can be  done under existing authorities. 
• The Biden-Harris Administration will also work with Congress to  make cattle markets fairer and more transparent. The Administration is  encouraged to see bipartisan legislation in the Senate by Senators Grassley,  Fischer, Tester, and Wyden, and in the House by Representatives Axne and  Feenstra, that seeks to improve price discovery in the cattle markets and facilitate  actual negotiation of prices between livestock producers and packers. We look  forward to working with Congress on these important issues, and we hope that  they will also look for ways to ensure farmers and ranchers have fair access to  processing capacity.