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In latest effort to combat rising prices, White House to offer $1 billion in aid for smaller meat-industry producers

Jan. 3, 2022 Updated Mon., Jan. 3, 2022 at 6:21 p.m.

Cattle are shown in a feedlot in Springfield, Neb., on Dec. 8, 2005. The White House announced Monday that it will devote $1 billion to aiding independent meat and poultry producers.  (Associated Press )
Cattle are shown in a feedlot in Springfield, Neb., on Dec. 8, 2005. The White House announced Monday that it will devote $1 billion to aiding independent meat and poultry producers. (Associated Press )
By Jeff Stein and Laura Reiley Washington Post

WASHINGTON – The White House announced Monday it will devote $1 billion to aiding independent meat and poultry producers, aiming to undercut the four powerful meat producers the Biden administration has alleged are responsible for surging consumer prices.

Facing immense political pressure over inflation, the White House has responded in recent weeks by criticizing large corporations and arguing that more competition will drive down prices.

In November, President Joe Biden asked the Federal Trade Commission to look into whether oil and gas companies were improperly pushing up energy prices.

This approach might not lead to a marked change in prices, though White House officials have tried to take credit for a recent retreat in gasoline costs.

But the messaging tactic could serve as an attempt by the Biden administration to reframe the debate about inflation by pinning the blame on corporations at a time when Republicans and even some Democrats have said the White House needs to acknowledge that their own policies could be driving up costs.

The stakes are particularly high in the beef industry, where prices in November rose by a staggering 21% relative to last year, according to federal data.

Food prices have also increased more broadly – by a significant 6.4% – with the index for meat, poultry, fish and eggs jumping 13 %.

The White House unveiled measures on Monday designed to boost competition in the meatpacking sector.

The steps include $375 million in grants to help independent meat producers; $275 million in capital; $100 million in training for the meat and poultry workforce; and $100 million to reduce inspection costs on “small and very small processing plants,” a statement said.

The White House said the funding comes from the $1.9 trillion American Rescue Plan passed by Democrats through Congress in March.

But industry groups and many economists have been critical of the administration’s attempts to redirect blame for inflation to large companies.

They argue that high consumer demand – supercharged by the relief plan – is responsible for widespread inflation.

“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,” a White House statement said.

“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.”

There is a disconnect between what ranchers and cattle raisers earn per animal and what the major meat processors are charging for the finished meat at the wholesale and retail levels, said Scott Bennett, the director of congressional relations at the American Farm Bureau Federation.

“Everybody is scratching their heads wondering what is going on. We’ve seen extreme volatility in the cattle market,” he said.

Bennett said the Farm Bureau has been advocating for additional slaughterhouse capacity.

“These small local regional packers are great for our communities. We’ve been lobbying for having those types of facilities more ready and available, and we’re pleased to see this administration funnel hundreds of millions of dollars into that effort.”

Industry groups have rebuked the administration for its approach.

Tyson Foods, for instance, has said rising prices are the result of the “drastic” drop in production caused by the global pandemic and severe weather.

The White House published an analysis in November that found the large meatpackers’ profits rose 300% during the coronavirus pandemic.In a blistering response, Julie Anna Potts, North American Meat Institute president, said the calculations “awkwardly and misleadingly combine these sectors and the council’s analysis conveniently excludes data on rising input costs, rising fuel costs, supply chain difficulties and labor shortages that impact the price of meat on the retail shelf.”

Prices in 2021 rose at the fastest pace in nearly 40 years for things across the board, from rent to used cars to groceries.

But some prices have risen faster than others. For food purchased at the grocery store, the category of meat, poultry, fish and eggs saw the steepest gain at 12.8% in November compared to a year ago.

By comparison, baked goods rose 4.6% and fruit and vegetable prices rose 4%.

Overall, food prices rose 6.1% for the year, but that pales when compared to gas prices up 58%, rental car prices up 37% and propane costs jumping 34%.

Poultry prices in particular, up 9% for the year, modestly outpaced inflation, and, according to Mike Brown, president of the National Chicken Council, its industry is the least consolidated in animal agriculture, with the market share owned by the top four companies virtually unchanged for the past 20 years.

The Biden administration’s new action plan, he said, “looks like a solution in search of a problem.”

While the demand for beef during the pandemic has skyrocketed, statistically Americans have swapped out beef for chicken.

According to the U.S. Department of Agriculture, in 1976, total per capita beef consumption in the United States was 94 pounds; chicken was 42.

Last year, beef was 58 pounds and chicken consumption rose to 97 pounds per person.

Brown says this surge in consumer demand has meant success for both family farmers and huge conglomerates, and that chicken companies have waiting lists of potential family farmers who want to enter the chicken business.

“It’s time for the White House to stop playing chicken with our food system and stop using the meat industry as a scapegoat for the significant challenges facing our economy,” Brown said.

“This administration should be looking at the chicken industry as a model of success, instead of creating a boogeyman to justify an unnecessary and expensive foray into our meat supply.”

Democratic economist Larry Summers, who warned the administration that its 2021 stimulus would cause inflation by overheating the economy in the spring, has strongly criticized policymakers who see antitrust efforts as a way to combat price increases.

Summers said on Twitter last week that the idea that antitrust policy could be used to reduce prices amounted to “science denial.”

“Monopoly may lead to high prices but there is no reason to expect it to lead to rising prices unless it is increasing,” Summers said on Twitter.

“There is no basis whatsoever thinking that monopoly power has increased during the past year in which inflation has greatly accelerated.”

Fiona Scott Morton, an economist at the Yale School of Management, said some of the White House’s measures, such as subsidizing independent meatpackers, would be unlikely to change consumer prices this year, unless new entrants are able to join the market this year.

But the steps could cause the existing large producers to rethink their prices and payments to workers and farmers, which she said could make an immediate impact.

Don Close, senior animal protein analyst for Rabobank, said that there are a number of reasons the big packers have been charging more for meats, especially beef, and that it isn’t about anticompetitive practices.

He said pre-pandemic the average starting wage in beef plants was $14.50 an hour, and that an entry level wage now is $22 per hour.

The single biggest reason for the difference between rancher earnings and processor meat prices, he said, is the plants’ inability to hire enough workers.

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