Consumers See Red, Meat Packers See Green as Beef Prices Rise

“It’s a scandal,” Denis said after a recent run to the grocery store.

The Atlanta retiree said she liked a nice cut of beef on the table, “but not enough to justify paying crazy prices.”

Inflation has pushed up prices for consumer goods almost everywhere, with closures and other fallout from the coronavirus blamed on shortages of everything from lumber to computer chips. The supermarket is another place where the pandemic has caught Americans off guard.

Since 2019, chuck roasts have risen nearly 29% to $ 6.80 a pound; ground beef now costs $ 4.68 a pound, up nearly 23%; and sirloin steak, at $ 10.59 a pound, rose 30%, according to the Department of Agriculture.

Beef prices have risen so rapidly that even Congress is questioning the reasons. He held hearings and promised to legislate on transparency. The industry says market forces are pushing prices up, but ranchers, retailers and consumers are questioning this in the face of record-breaking profit margins for meat packers.

The North American Meat Institute, an industry association, said in documents that prices had increased because COVID-19 hit meat packers with new costs, such as providing personal protective equipment for employees and the redevelopment of factories with protective screens. Slowdowns or slaughterhouse closures due to illness have reduced production, and the pandemic has also increased transportation expenses due to the shortage of truck drivers.

At the same time, demand has increased from US and international buyers. And like Georgia’s chicken processing plants, beef packers have been forced to pay higher wages to hire workers.

Meat packers make money

The country’s four big packers of cattle meat – Tyson Foods, Cargill, JBS and National Beef Packing – control 80% of the market. Sometimes, since the spring of 2020, they’ve earned $ 1,000 for every cow they turned into a box of cuts, an industry observer estimated. Over the past few months, it has been in the range of $ 300 to $ 400. But, for most of 2018, it hovered below $ 200.

While financial information on JBS, National Beef and Cargill was not available, Tyson said its operating profit for the first nine months of 2021 was $ 2.4 billion higher than the same period in 2020, according to third quarter documents filed with the US Securities and Exchange. Commission. Beef sales contributed to that, he said.

But the higher prices don’t mean ranchers like Cleve Jackson, who lives in Floyd County, Ga., Are earning more. Its price for live cattle hasn’t dropped by more than a dime or two from the $ 1.40 a pound it got at its last auction.

Beef is Georgia’s fourth-highest-grossing agricultural commodity, earning ranchers $ 661 million, according to 2021 calculations from the University of Georgia. Only broilers, cotton and timber are more profitable.

The beef industry is one of the most consolidated segments of agriculture. Most Georgian cows are shipped to the Midwest to feedlots. Feedlots raise them to slaughter weight before selling them primarily to the Big Four Meat Packers, which are also located in the Midwest. This consolidation has brought advantages, but also disadvantages.

Wendiam Sawadgo, assistant professor and agricultural extension economist at Auburn University, said consumers benefit from the consolidation of meat packers because it helps lower production costs.

“However, processors have market power, so they have the ability not to pass all cost reductions on to the consumer,” he said.

Shortages mean higher prices

Some of the drawbacks have caused national price fluctuations. A fire in August 2019 caused the shutdown for months of a Tyson plant that produced 6% of all American beef. Last June, JBS suffered a ransomware attack and had to temporarily shut down its factories – 20% of beef processing in the United States, which exacerbated the shortages.

Shortages mean higher prices, Sawadgo said.

This game between scarcity and price has caught the attention of breeders and retail lawyers.

“The processors have a kind of monopoly in the market,” said Fred Gretsch, who operates Gretsch Brothers Angus in Oglethorpe County, Georgia, near Athens. He fears that they have the power to dictate rather than obey market forces.

“They were able to do two things when the fire happened,” Gretsch said. The slowdown in production has resulted in a return of livestock awaiting slaughter, creating a glut and low prices for livestock.

“They were able to drive up beef prices in the market for the end user and push back the guys who supplied them with cattle – the feedlot and the cow-calf producer,” he said.

Pricing lawsuits in Minnesota and Illinois allege there is ill intent in slowing production by meat packers during a period of increasing demand. Meat packers deny the claims.

A request for beef

The White House and members of Congress are also monitoring what’s going on with pricing. Agricultural and judicial committees hold hearings and demand transparency in pricing and how the structure of large corporations deals with ranchers and feedlot owners. Lawmakers are talking about relaxing regulations on small regional or local slaughterhouses to increase competition and offer start-up or expansion grants.

The White House also released a statement on September 8 saying the administration will “enforce antitrust laws, increase competition in meat processing, and push back pandemic profits that hurt consumers, farmers and ranchers across the country. “.

The North American Meat Institute has responded by blaming COVID-19 and calling on administration officials to stop making the industry a scapegoat.

Despite the price increases, people still buy beef, and demand and prices for meat are expected to remain stable until at least 2022.

Jackson is looking for the longer term. He has a full-time job in drugstore sales, so he doesn’t depend on livestock to make ends meet. He hopes to continue living and earn enough money at least to pay the costs of the farm.

“I am a third generation farmer,” he said. “I hope we have a fourth generation behind us.”

© 2021 The Atlanta Journal-Constitution. Visit ajc.com. Distributed by Tribune Content Agency, LLC.

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