Consumers feel impact of inflation but origins draw fire

Consumers are seeing higher prices for meat, regardless of whether it is beef, pork, poultry or lamb.

That is a given but the issue of inflation has caught the attention of people throughout the chain and has reached the upper echelon of the White House. How much blame should be assigned is a different story.

Biden administration officials believe supply chain level disruptions are affecting prices but they also assert there is another culprit: dominant corporations in uncompetitive markets taking advantage of their market power to raise prices while increasing their own profit margins, according to White House blog written by Brian Deese, Sameera Fazili and Bharat Ramamurti. Deese is the American economic and political advisor who is the director of the National Economic Council. Fazili is the deputy director and Ramamurti is a member of the COVID-19 congressional oversight commission.

In their blog post they singled out meat prices and that beef, pork and poultry prices make up a quarter of the overall increase in food-at-home prices in November.

“As we noted in September just four large conglomerates control approximately 55 to 85% of the market for pork, beef and poultry and these middlemen are using their market power to increase prices and underpay farmers, while taking more and more for themselves.”

The blog noted the meat processing companies they based their findings on were Tyson, JBS, Marfrig and Seaboard. They also noted some processors are private companies and do not report publicly on profits, margins or incomes.

“According to these companies’ latest quarterly earning statements, their gross profits have collectively increased by more than 120% since before the pandemic and their income has surged by 500%. They have also recently announced over a $1 billion in new dividends and stock buybacks, on top of the more than $3 billion they paid out to shareholders since the pandemic began.”

Disagreement quickly noted

Not so fast is what the North American Meat Institute says in a news release asserting the blog post was a desperate attempt by the White House Economic Council to shift blame for record food inflation to the meat and poultry industry.

“The White House Economic Council is again demonstrating its ignorance of agricultural economics and the fundamentals of supply and demand,” said Meat Institute President Julia Ann Potts. “This is simply a rinse and repeat of their September attempts to blame meat and poultry companies for inflation that is not limited to food, but is being felt across the economy.

“Beef, pork and poultry all have their own supply and demand market fundamentals. The calculations used by the Economic Council 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. Plus, recent economic data indicates packer (wholesale) margins have fallen by 30% to 60% depending on the species as the industry works through the historic supply chain disruptions of the last 18 months.”

Potts said the blog post came out the same day as the Consumer Price Index noted that gas and energy prices are up nearly 60% over the past 12 months, which is nearly 10 times the rate of inflation for food.

Potts said demand for meat and poultry products has never been higher and she said the members of the Meat Institute are doing their part to keep the farm economy moving.

In the White House blog post the writer said the U.S. Department of Agriculture’s approach to help small meat processors will expand the meat and processing capacity and that will be good news for agricultural producers and consumers.

Dave Bergmeier can be reached at 620-227-1822 or [email protected].