Although the White House blames big meatpackers for driving up food prices, the real culprits are higher costs and labor shortages all along the supply chain, said a pork industry report on Wednesday. Four packers control 65% of hog slaughter in the United States, but the industry is less concentrated than it was five years ago.
Pork prices soared 15% in 2021, twice the overall U.S. inflation rate. President Biden says more competition in the highly consolidated meat industry will bring down prices at the grocery store. “In too many industries, a handful of giant companies dominate — dominate — the entire market. And we see it in Big Ag … Big Tech and Big Pharma,” said Biden at a meeting of his Competition Council earlier this week.
But the pork industry is less concentrated than some other sectors of the food industry, including breakfast cereals, beet sugar, and bottled water, said the three economists who wrote the report.
“Retail pork prices have increased rapidly due to strong demand for U.S. pork as well as added costs and labor shortages at every level of the supply chain,” said economists Dermot Hayes of Iowa State University, Barry Goodwin of North Carolina State University, and Holly Cook of the National Pork Producers Council.
As evidence, they pointed to price spreads at two points in the pork supply chain: the difference between prices at the farm and wholesale levels, and the difference between wholesale prices and retail prices. Packers operate at the meeting point between those price spreads.
“In recent months, farm and wholesale prices have fallen sharply while retail prices remain elevated,” said the report. “If packers were exercising market power to capture greater profits, one would expect the farm-to-wholesale price spread to grow and the wholesale-to-retail price spread to shrink. Instead, the opposite has occurred.” In the past six months, the farm-to-wholesale price spread declined 15% while the wholesale-to-retail spread “was up more than 35% over the same period due to added retailer costs and a potentially lagged response to high wholesale prices this summer,” the report said.
An economist not involved in the report said the widening of the wholesale-to-retail price spread “suggests supply chain issues and labor costs.”
Persistently high meat prices were the leading factor in food price inflation of 6.3% in 2021. The White House, in a blog last month, said meat prices were an example of “dominant corporations in uncompetitive markets taking advantage of their market power to raise prices while increasing their own profit margins.” Four large companies account for the bulk of cattle, hog, and poultry slaughter in the country, and leading processors have reported huge earnings increases for 2021, said the blog, written by Brian Deese and two assistants at the National Economic Council.
Tyson Foods reported net income of $3 billion in 2021, a 47% increase from 2020.
Higher meat prices have not dented U.S. meat consumption. Per capita consumption of red meat and poultry was a record 225.3 pounds per person — 9.8 ounces a day — in 2020, the first year of the pandemic, up nearly a pound from 224.4 pounds in 2019, according to USDA data. Consumption dipped slightly in 2021, to 223.8 pounds per person, and is forecast at 222.5 pounds this year. The previous record for per capita meat consumption was 220.2 pounds in 2004.
