USDA report: The meat industry caters to a select few

Retailers, distributors, and packers in the meat industry appear to be engaging in unfair business practices, according to a new report released Monday by the U.S. Department of Agriculture.

The practices include engaging in pricing structures, marketing decisions, and overall relationships that enhance the dominance of the market at the expense of competition in the meat industry.

Excessive marketing fees, accrual fee arrangements, and potentially anticompetitive preferential arrangements and price discrimination by certain food distributors, meat packers, and retailers are also happening, according to the USDA report titled “Interim Report: Competition and Fair Practices in Meat Merchandising”.

The report draws from over 1,600 comments received from the public in response to USDA requests for information, interviews with small, medium, and large meatpackers, distributors, retailers, academia, and farmers or advocacy organizations.

The report was just one step of a multistep process the USDA is conducting to deliver on President Biden’s executive order on promoting competition in the American economy to promote fair and competitive markets for American farmers and ranchers and lower food prices in the U.S.

Concentration in retail and distribution markets and among meatpackers has dramatically increased, the report noted, while the number of livestock producers has declined.

With fewer packers, distributors, and retailers taking up a larger share of meat sales anticompetitive practices have surfaced, including unnecessary fees and other costs. The landscape has also led to market share leaders offering better pricing than competitors.

“Our work on competition is about opening up new markets for farmers and delivering fairer, more competitive choices,” said Secretary of Agriculture Tom Vilsack.

The USDA stressed the conclusions in the report are interim because the agency has not largely enforced competition regulations in meat merchandising for several decades and part of the purpose of the investigative study is to gain familiarity with current practices.

The actions the USDA are expected to take include:

The USDA will also enhance cooperation between the USDA Food Safety Inspection Service and the USDA’s Agriculture Marketing Service’s Packers and Stockyards Division to enhance market monitoring, rulemaking, and enforcement.

Furthermore, the USDA announced next steps in a new rulemaking effort under the P&S Act to enhance price discovery and fairness in cattle markets.

The average price of meat increased 6.1% over a 52-week span ending April 21, 2024, according to Circana, a Chicago-based market research firm. However, Circana also noted beef volume sales dropped just 0.5% over the same time period.

Ground beef was especially popular during the year. Despite a 6.4% price increase to $5.02 a pound, volume sales grew 1.4%.

The Meat Institute said the move to revise the P&S Act is the USDA’s attempt to assert government control over the free market.

“When the USDA says it wants to ‘enhance fairness’ in cattle markets, they mean pick winners and losers,” Meat Institute President and CEO Julie Anna Potts said in a statement. “They want to end the use of Alternative Marketing Arrangements and force producers and packers into the cash market.

“Moving back in time to a commodity cattle market will reduce competition, innovation, and quality, ultimately hurting the entire industry.”

Other actions the USDA is executing to enforce President Biden’s push to lower food prices include leveraging its funding and research capacity, as well as interagency partnerships, to increase transparency and improve researcher access to seed germplasm, the starting materials plant breeders need to create diverse, resilient, and competitive seed varieties.

“Today’s actions will help deliver on more choice and lower costs for seeds used by farmers, more choice and lower food costs for consumers, and a fairer marketplace for ranchers,” Vilsack said.