WASHINGTON – Is consolidation and anti-competitive behavior driving inflated prices for meat and poultry? Stakeholders on both sides of the debate made their case in testimony before the US House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law. House Judiciary Committee Chairman Jerry Nadler (D-NY), said, “This hearing is part of a larger effort not only to diagnose the problems facing our food system, but also to come up with meaningful solutions.”

The Biden administration has flagged meat prices as “…the biggest contributor to the rising cost of groceries, in part because just a few large corporations dominate meat processing.”

Speaking from a producer point of view was Joe Maxwell, president of Farm Action, an advocacy group that focuses on agricultural issues. In his testimony, Maxwell argued that consolidation in agriculture presents risks to food security and national security.

“Concentration drives up food costs, contributing to the recent spike in inflation,” Maxwell said. “Concentration in the food system drives farmers from the land and businesses out of business, hollowing out the economic vitality of rural America.

“It unreasonably profits from supply chain disruptions that leave shelves bare at the grocery store, prices higher for consumers, and steals farmers’ profits increasing the burden of taxpayer-funded subsidies and safety nets that prop up farmers and provide for food insecure households,” he said. “It is a self-perpetuating cycle of destruction that is tearing through rural America.”

Julie Anna Potts, president and chief executive officer of the North American Meat Institute (NAMI), said in testimony before the committee that multiple factors are at play.

“During 2020, pandemic-related plant interruptions temporarily idled about 40% of slaughter capacity for cattle and hogs at the peak of its impact,” Potts said. “This disruption happened in tandem with unprecedented retail demand for beef due to panic buying and freezer stocking as shelter-in-place orders were effectuated.

“The situation was worsened by the significant operational changes needed to rebalance production, processing, and distribution away from foodservice toward retail,” she added. “The cuts, product sizes, processing equipment, packaging, and distribution vary considerably between retail and foodservice and are not easily transitioned, but the industry was resilient and adapted.”

The pandemic also exacerbated existing challenges such as the lack of available labor.

“Production in meat packing and processing plants is labor-intensive, and therefore tied to the number of employees working the line,” Potts explained. “Throughout 2021, even as the comprehensive COVID-19 protections instituted by the meat industry since the spring of 2020 successfully lowered transmission among meatpacking workers and held case rates lower than case rates in the general US population, worker shortages have persisted. The Meat Institute regularly hears from member companies challenged with 20% absenteeism on any day. Without a steady, reliable workforce, plants do not run efficiently and production declines. Labor is capacity.”

The meat industry has been facing an ongoing labor shortage which highlights the need for an expanded, year-round agricultural guestworker program, Potts said. The current program is inadequate because it is seasonal and doesn’t include the meat and poultry industry.

“If Congress wants to take concrete action that will help producers and help consumers, then pass legislation to alleviate the labor shortage in packing and processing plants,” Potts said.

Ultimately, economic fundamentals are driving inflation, according to Potts. Labor shortages, transportation and supply chain disruptions and regulatory policies collectively raised prices for wholesale and retail beef.

But Maxwell argued that market fundamentals fail to explain “…the market dynamics of concentrated corporate power.” Maxwell said at least four companies control the inputs farmers need to produce crops, livestock and poultry.

“The level of concentration and vertical integration in the poultry industry is at such high levels there are almost no individual independent poultry farmers left today,” according to Maxwell. “The majority of farmers in the poultry business are contract poultry growers, who raise a vertical integrator’s poultry for companies like JBS/Pilgrims, Wayne Farms, Sanderson Farms and Tyson Foods.

“These companies own the chick from hatch to grocery store shelf,” he continued. “Farmers have become the landlord and owner of poultry barns used by the vertical integrators where the farmer provides the facilities, labor, and manure management. Often the contract poultry grower has borrowed millions of dollars against their home and farms in order to build the facilities that house a poultry integrator’s chickens on a per-flock basis. Because these barns are solely designed for poultry production and oftentimes only meet the specifications of one poultry integrator, the farmer becomes trapped and beholden to the large poultry integrator in their region.

“In reviewing $1.8 billion dollars of loans to contract poultry growers by the Small Business Administration (SBA), the SBA Inspector General found the level of control the vertical integrator exercised over the contract grower practically overcame all of the contract grower’s ability to operate their business independent of the vertical integrator's mandates,” Maxwell said in his testimony. “The contract poultry grower lives in an economic reality where one wrong move or step out of line results in the loss of their contract with the vertical integrator, and possibly their farm and home as well.”

Also testifying at the hearing were Allison Johnson, sustainable food policy advocate, Natural Resources Defense Council; Geoffrey Manne, president and founder, International Center for Law and Economics; Trina McClendon, owner of Trinity Poultry Farm LLC; Michael S. Needler Jr., CEO, Fresh Encounters; and Peter St. Onge, research fellow, economic policy, The Heritage Foundation.