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The Biden administration desperately needs a win on inflation, and cutting the price Americans pay for beef would have an immediate impact on most families.
Yet the prescription unveiled by the White House this week to boost competition in the highly concentrated meat sector, while prudent, won’t make much of a dent on meat prices, at least not for a while. It isn’t likely to help fight inflation, either. No wonder shares of Tyson Foods Inc., a big producer of beef as well as chicken, have risen more than 4% since the plan was announced.
Meat prices have been soaring — accounting for more than half the increase in grocery costs for American families. The blame for this, according to the administration, belongs with the four companies that together control more than 80% of the meatpacking market. The White House has been focused on this industry for months, arguing that excessive concentration is hurting consumers, who are paying more for their steaks and burgers, as well as small ranchers and farmers, who have struggled to stay profitable.
The push to inject competition into meatpacking is part of a broader effort by the Biden administration to challenge concentrations of power in business, in industries ranging from technology to railroads to health care. Under the plan, the administration will spend $1 billion to help independent meat-processing companies expand their operations and hire additional workers
Yet it will take a while before the promised funds have any impact. For one, like much of the US economy, the meat industry is dealing with a shortage of workers, which will make it challenging for smaller competitors to scale up without raising wages.
Former Treasury Secretary Lawrence Summers took to Twitter recently to say that the administration’s efforts could have the opposite effect, by discouraging investment that could boost supply. A better approach to keep prices in check, Summers suggests, would be to open up the market to international competition.
It’s something of a paradox that prices of packaged beef have skyrocketed even as cattle prices have fallen. Indeed, while the big meatpackers point to the increasing cost of everything from labor to trucks as the culprits for more expensive beef, their profit margins have risen substantially, too. In other words, all those costs, and then some, are being passed along to consumers. This suggests that funneling money to smaller
producers won’t help on its own. Tougher enforcement is needed, too.
There are signs that more oversight is coming. The Biden administration is now working to issue stronger rules under the Packers and Stockyards Act, a law designed to combat abuses by meatpackers and processors. All these small steps could chip away at the big four. They might even slow the climb in meat prices. Just know you’ll still be paying more for burgers for some time to come.
—Bloomberg