Joe Biden has a plan to stop meat prices from soaring, but will it work?
■ The cost of ground beef, pork, chicken, poultry and other meats has increased, and the White House has a plan to promote more competition among processors.
Meat prices have soared this year. A pound of ground beef at the grocery store this week costs on average $4.49 a pound. Stew meat is nearly $6 a pound.
President Joe Biden vowed this week to try to halt the spiraling prices with a $1 billion plan to promote more competition in the meat industry.
But experts say it’s going to take a lot more than some Washington-driven initiatives to keep meat inflation in check.
“The prices of meat go up and down from year to year, and they may be about ready to dip again, which has nothing to do with any initiatives,” said Daniel Sumner, professor of agricultural and resource economics at the University of California, Davis.
Prices generally fluctuate, he said, because of market forces such as labor costs, consumer preferences, weather and many other factors.
Meat, poultry and fish prices last year went up an estimated 6% to 7%, well above the 20-year average of 2.9%, the U.S. Department of Agriculture said.
The biggest price swells involved beef and veal, up an estimated 9% to 10% last year after increasing 9.6% in 2020. The 20year average increase has been 4.4%.
Biden blamed an industry that has operated without enough competitive pressure.
A White House fact sheet said four large meatpacking companies control 85% of the beef market. In poultry, the top four processing firms control 54%, while four firms control about 70% of the pork 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,” the White House said.
Biden this week described the situation this way: “While their profits go up, the prices you see at the grocery stores go up commensurate and the prices farmers receive for the products they are bringing to market go down. This reflects the market being distorted by a lack of competition.”
Others disputed that explanation.
“Prices are high because of increased consumer demand,” Sarah Little, spokeswoman for the North American Meat Institute, the trade association for meat and poultry packers and processors of all sizes, told The Sacramento Bee.
Sumner noted several reasons for price fluctuations. One was that as people ate less in restaurants during the pandemic and more at home, meat supplies became tighter, helping push up prices.
“When the demand curve shifts like that, prices go up,” he said.
BIDEN AIMS FOR LOWER PRICES
The Biden plan hopes to help small independent meat processors, a move the White House says should increase competition with the largest distributors. The agriculture department would provide government funds to aid financing.
The plan also provides funds for training and it offers technical assistance and research and development to help independent business owners, entrepreneurs, producers, and other groups, such as cooperatives and worker associations.
Supporters lauded not only the help for smaller businesses but the ripple effect the plan could have on local economies.
“We’re excited about being able to have local
‘‘ PRICES ARE HIGH BECAUSE OF INCREASED CONSUMER DEMAND. Sarah Little, spokeswoman for the North American Meat Institute
processing done by local people and then sell directly to the consumer,” said Scott Blubaugh, president of the Oklahoma Farmers Union, as he appeared with Biden Monday at the White House.
But the North American Meat Institute’s Little saw scant help for consumer prices anytime soon.
“It is hard to predict retail prices but the new capacity the administration wants to create will not come online for some time, and even then it will not increase capacity in a noticeable way,” she said.
Neil Bradley, executive vice president at the U.S. Chamber of Commerce, was also skeptical.
“One has to ask, if, as the administration asserts, consolidation in meat and other industries has been a problem for years and it is also driving the current surge in prices, then why didn’t it drive prices higher before?” he asked.
Sumner said having the White House point out the concentration of big firms in the meat processing industry is “absolutely right.”
But, he added, “The meat packing industry in the United States has been relatively concentrated for decades,” he said. “Nothing has changed significantly that would cause concentration or market power to cause inflation this year.”
MEAT PRICE TRENDS
The agriculture department, in its forecast two weeks before Biden announced his plan, saw a slowdown in meat price increases in 2022.
It predicted beef and veal prices will go up 2% to 3% this year, which would be the slowest annual increase since 2019.
The forecast’s latest survey of meat prices in the Southwest, which includes advertised retail prices this week at stores in California, Arizona, Utah and Nevada, had a price for boneless top sirloin steak at $5.99 a pound.
Ground beef that’s 80 to 89% lean, surveyed in 50 stores, averaged $4.49 a pound. Rump roast averaged $4.99 a pound.
The department cited several factors that go into price changes– ”strong domestic and international demand, labor shortages, supply chain disruptions, and high feed and other input costs. Concentration and capacity constraints within the meat industry could also affect prices.”
One reason farm prices of cattle, hogs and poultry have been up recently is in part because feed prices are high this year, Sumner said.
He also noted that the cost of meat processing has risen with COVID-19 because companies
“have many workers who were especially vulnerable to getting COVID.”
With all these factors in play, Sumner said, there’s no easy, reliable way to say how meat prices will fare, except the oldest rule of economics.
“It’s supply and demand,” he said.