- White House announces $1 billion in funding to support investments in smaller meat and poultry processors in bid to increase competition and reduce prices
- Funding will support grants, loans and loan guarantees, reduced fees, workforce development, and technical assistance
- Plan wins support from some agricultural groups, while others criticize it as blaming private industry for broader economic problems
Summary by Dirk Langeveld
The White House will make millions of dollars available this year to support the expansion and strengthening of smaller meat processors, saying this approach will help broaden competition and bring down food prices. The announcement has drawn criticism from some industry groups, who argue that the strategy does not address larger economic challenges responsible for price increases.
President Joe Biden outlined the plans in a virtual meeting with independent farmers and ranchers on Monday. The meeting included an announcement of $1 billion in American Rescue Plan funds to create and expand independent meat and poultry processing capacity.
“To bring in more competition and dignity and more farmers, ranchers, and customers, we’re going to invest in new and innovative small businesses and meat processors — the lifeblood of our economy,” said Biden.
Meat prices have risen 16 percent compared to a year ago, including a 20.9 percent increase in the cost of beef. The White House says the beef, pork, and poultry markets are largely controlled by the four largest corporations in each industry, including 85 percent of the beef market, 70 percent of the pork market, and 54 percent of the poultry market.
Biden said these major processing firms serve as middlemen between farmers and ranchers and grocery stores, enabling them to increase prices, muscle out smaller firms, and decrease options for consumers. The White House strategy aims to strengthen competition and reduce consumer costs.
Secretary of Agriculture Tom Vilsack outlined how the $1 billion investment will support smaller meat and poultry processors:
- $375 million in gap financing grants will support independent processing plant projects that “fill a demonstrated need for more diversified processing capacity,” with $150 million slated to become available to at least 15 projects this spring through a request for proposals and the remaining $225 million to become available during the summer
- Up to $275 million to partner with lending partners to support affordable loans and other support for smaller processors; the U.S. Department of Agriculture will begin soliciting applications from potential partners this summer
- A $100 million loan guarantee program to address middle-level supply chain challenges such as cold storage and warehousing; Vilsack said this program will allow these facilities to expand their operations and is expected to leverage $1 billion in additional investments
- $100 million toward reducing overtime inspection fees to help small processors meet increased consumer demand
- $100 million for workforce development efforts
- $50 million for technical assistance and research efforts
Vilsack also noted how the USDA has provided $32 million in grants to 167 processors to help them reach more customers by becoming federally inspected.
The White House plan won praise from some agricultural groups, which said the plan will help address longstanding issues with competition in meat processing. Zippy Duvall, president of the American Farm Bureau Federation, said the issue should garner bipartisan support as a way of improving price discovery in the cattle markets.
“AFBF appreciates the Biden administration’s continued work to ensure a fair and competitive meat processing system,” said Duvall. “We must get to the bottom of why farmers and ranchers continue to receive low payments while families across America endure rising meat prices.”
Rob Larew, president of the National Farmers Union, said the White House plan addresses consolidation in the meat processing industry that has harmed family farmers and ranchers as well as the consumer. He said producers have been experiencing fewer and more expensive processing options while consumers have been forced to pay higher premiums when purchasing meat.
“We are hopeful that the administration’s renewed focus on boosting competition and reducing prices will force the changes needed to create an even playing field for those who take on the responsibility of feeding America,” said Larew.
Bill Bullard, CEO of the cattle and sheep producing organization Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America, said the plan should slowly rebuild marketing and distribution channels for producers as well as consumers.
“We recognize that this level of government involvement is unprecedented, and that it’s critical for reversing the decades of inattention, neglect and denial that facilitated the elimination of competition in our U.S. cattle industry,” said Bullard.
Bullard was more skeptical of the administration’s plans to enforce anti-competitive laws, including efforts to strengthen the Packers and Stockyards Act, a stricter definition for “Product of the USA” labeling, and the announcement of a central portal to report potential violations of competition laws. Bullard said these actions fall short of the “decisive enforcement action” needed to address competitive challenges in the cattle industry.
Other groups accused the White House of blaming and targeting private industry for broader economic woes. Mike Brown, CEO of the National Chicken Council, said issues such as strong consumer demand, supply chain disruptions, and labor shortages have been driving price increases above the board. He said the 9 percent increase in chicken costs has barely kept pace with higher prices in areas influencing the industry, such as feed and transportation.
“It’s time for the [White House National Economic Council] to stop playing chicken with our food system and stop using the meat industry as a scapegoat for the significant challenges facing our economy,” said Brown. “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.”
“The administration wants the American people to believe that the meat and poultry industry is unique and not experiencing the same problems causing inflation across the economy, like increased input costs, increased energy costs, labor shortages and transportation challenges. Consumers know better,” said Julie Ann Potts, president and CEO of the North American Meat Institute, a trade association representing meat and poultry packers and processors of all sizes.
Potts also cited a series of tweets by Larry Summers, NEC director under President Barack Obama and Treasury Secretary under President Bill Clinton. Summers said that while the growth of monopoly power can lead to higher prices in an industry, consolidation in the meat and poultry industry has not increased in the past year while inflation has been on the rise.
The U.S. Chamber of Commerce agreed that increased demand, supply chain constraints, and greater input costs such as increased labor and energy costs have been driving higher meat prices. The organization criticized the White House plan as “misguided,” saying government intervention will likely further constrain supply and push prices higher.
“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?” asked Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce. “It is pretty clear that the administration is attempting to use higher prices to justify their preexisting agenda to overturn decades of bipartisan consensus around antitrust and competition policy in favor of a ‘government-knows-best’ regulatory approach.”