Meat Giants Face Ire in Washington Amid U.S. Beef Surge

© Reuters Meat Giants Face Ire in Washington Amid U.S. Beef Surge

(Bloomberg) -- Meatpackers are in the crosshairs of U.S. lawmakers including traditional allies as ranchers complain that beef processors are abusing market power to gain out-sized margins at their expense.

Four giant companies control more than 80% of U.S. beef processing. Ranchers and cattle feeders are seething over a surge in retail beef prices this year that they say has resulted in little improvement in the prices they receive for livestock, repeating a pattern during the early months of the Covid-19 pandemic.

Rural Republican senators, traditionally allies of business interests, have been criticizing meatpacking companies as farm and cattle groups demand more scrutiny of the industry. Executives from Tyson Foods Inc (NYSE:TSN). and JBS USA -- the two biggest U.S. beef packers -- were giving testimony Wednesday at the U.S. Senate’s Judiciary Committee.

Tyson in prepared remarks for the hearing said high beef prices and comparatively lower cattle values had “everything to do with the law of supply and demand and the unprecedented and massive -- but we believe, temporary -- system shock brought on by the Covid-19 pandemic.”

During the initial outbreak, thousands of meat-plant workers caught the virus, prompting shutdowns at facilities. Outages at plants across the U.S. slowed cattle slaughtering, sending animal prices tumbling while meat prices surged. That pattern was repeated, albeit briefly, when JBS shut down plants for about a day during a recent cyberattack.

The U.S. Department of Agriculture is offering grants and loans to encourage smaller slaughter plants to open or expand in a bid to make the food system more resilient. Meanwhile, drought and rising feed prices have been hitting profits in cattle ranching, helping to bring down herds and slowly give ranchers more bargaining power.

President Joe Biden singled out meatpacking as an area that regulators should scrutinize in an executive order earlier this month instructing federal agencies to step up efforts to promote more competition throughout the economy. U.S. Agriculture Secretary Tom Vilsack also announced plans to propose new regulations to provide livestock and poultry producers greater protection in their dealings with meatpackers.

Two bills have been introduced in Congress to require more transparency in pricing and terms of cattle purchases, in the hopes this it will give producers more leverage in transactions.

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