- The federal government committed more than $655 million and promised changes in federal laws to help smaller meat processors compete with larger competitors and succeed in the aftermath of the industry's challenges during the COVID-19 pandemic. These moves are part of a sweeping executive order issued by President Joe Biden on Friday that aims to promote market competition in areas ranging from food to healthcare to technology.
- The order puts $500 million to support market entrants and relieve supply chain bottlenecks by creating new meat and poultry processing facilities. More than $155 million will go to help the smallest existing processing plants. And Biden promised updates to the Packers and Stockyards Act, which he said was initially passed to ensure competition but has been weakened in favor of the largest producers.
- The meat industry was badly strained by the COVID-19 pandemic, which forced several large processing plants to temporarily shut down or cut back operations last year. But accusations of large companies conspiring to keep business — and profits — for themselves have been coming out since before the pandemic, with recent criminal prosecution, civil antitrust lawsuits and federal probes into disparities between market prices and payment for smaller processors.
The meat industry has long been dominated by a few big players, a system that has been exposed in the recent past both by pandemic-related shortages and the litany of investigations, lawsuits and prosecutions in many different sectors. This executive order is the beginning of the Biden administration's efforts to craft a potential industry fix.
According to the White House fact sheet about the executive order, four large meatpacking companies control more than 80% of the beef market. In the last five years, farmers’ share of the price of beef has dropped by more than a quarter — from 51.5% to 37.3% — while the price of beef has risen, the agency says, citing USDA data.
USDA Secretary Tom Vilsack traveled to Iowa on Friday to talk about the executive order.
“I think it sends a strong message to those who are currently in the business that they are not necessarily going to have that capacity, and that they need to be sensitive to the needs of producers,” Vilsack said, according to Iowa Capital Dispatch. “It’s not in in their best interest, it’s not in the best interest of the nation, to seek future consolidations or to to drive people off the farm.
“We have to expand the processing in this country. We can no longer rely on four packers. We are breaking new ground today,” Vilsack added.
Joe Maxwell, president of Family Farm Action Alliance, an organization that opposes agricultural monopolies throughout the supply chain, said in a written statement that no president since Franklin D. Roosevelt has taken on corporations to this extent.
"Because our government has failed to do its job, a handful of transnational corporations and their overpaid CEOs control our farm and food system, driving family farmers off the land, abusing workers, degrading our environment, and leaving consumers without healthy and safe food choices," Maxwell said in the statement. "Today’s Order is one of several recent signs that the tide may be turning."
But the North American Meat Institute, a trade association representing most beef, pork and poultry producers, does not agree that this is needed. Spokesperson Sarah Little told Agri-Pulse that boosting smaller processors is unlikely to make a difference.
"The bottom-line is, the current level of four-firm concentration has existed for more than 25 years and it has not ensured packer profitability at the expense of producers," she told the trade publication. "No sector — cow-calf, feedlot, nor packer — has realized positive margins every year."
The new funds, which come from the USDA's portion of the American Rescue Plan, are just one piece of the reforms Biden is working on. He also intends to strengthen the Packers and Stockyards Act, passed in 1921 to assure competitive practices in agriculture. Through changes made during the Trump administration, the rule lost a lot of its force. The independent office that enforced the rule was quietly folded into USDA's Agricultural Marketing Service, which administers checkoff-funded marketing programs. A rule under this office that would have established legal protections for small providers contracting with big ag producers, which was established at the end of the Obama administration but scuttled by the Trump administration before it took effect, is likely to be re-established. The Biden administration's new attention to this law was previously announced in June.
The executive order also reiterates the Biden administration's intent to clarify country of origin labeling on meat products. After the Federal Trade Commission voted early this month to crack down on companies improperly using the "Made in the USA" label on products, Vilsack vowed to do the same at USDA for meat products labeled "Product of the USA" with meat that was not domestically raised.
While this executive order has several big actions, it will take some time to determine how they will be taken. There will be several federal rulemaking processes — and opportunities for stakeholders to comment — before any changes are made. But even though it may take some time, the Biden administration is clear that it wants to use competition to correct longstanding issues in the food system and is prepared to make a big commitment to the meat sector.