The U.S. meatpacking industry faces a fresh wave of scrutiny, this time from Senate Democrats seeking to allow companies to process only one type of meat and set stricter limits on the beef market.
The bill, introduced by the Senate’s top Democrat, Chuck Schumer of New York, comes at a time when record consumer beef prices have become a flashpoint of voter anger over food inflation heading into November’s U.S midterm elections. President Donald Trump also last fall asked the U.S. Justice Department to investigate the industry.
“It’s not right for a single company to have the power to dominate beef, pork, chicken all at once,” Schumer said at a news conference unveiling the legislation.
The meatpacking industry has long faced bipartisan scrutiny due to high levels of concentration. The country’s top four beef packers buy more than 80% of cattle, while a separate group of pork processors account for about two-thirds of hog purchases, according to the US Department of Agriculture. Those levels of concentration are higher than when the U.S. first took action against the meatpacking industry in the 1920s, Schumer noted.
The current pricing surge is linked to shifts far earlier in the supply chain with the U.S. cattle herd at a 75-year low, as high interest rates and droughts discouraged ranchers from raising more animals.
That has hit both shoppers and meatpackers alike. Beef and veal prices in the consumer price index were up 15% over the past year as of January, with ground beef in particular at a record. Meanwhile, margins for processing beef in February touched a record low in data going back to 2013, according to HedgersEdge, leaving meat companies more reliant on other proteins like chicken to offset losses in their beef segments.
The bill would limit major meatpacking conglomerates to one major type of meat, such as beef, pork or poultry, and impose limits on beef market concentration at both regional and national levels.
It’s “really hard to know what decisions would get made if this were to be the law of the land,” but meatpackers are losing money in their beef businesses, Julie Anna Potts, chief executive officer of industry group The Meat Institute, said in an interview.
“What if every one of the big packers decides to get out of the beef business at the same time?” she said. Meatpackers including Tyson Foods Inc., the country’s largest, have already been closing plants. That loss of capacity, with few new players able to step in, “would be devastating for producers and devastating for consumers,” Potts said.
“The idea that we would maintain capacity in the face of this kind of policy proposal is just absurd,” she added.
The legislation has backing from 12 Senate Democrats, who are currently in the minority without the ability to advance the measure. But Schumer’s championing of the legislation elevates its chances should Democrats gain control of the chamber after the November elections.
The bill limits sales arrangements between a single feedlot and a packer, which critics argue can be the functional equivalent of ownership. The U.S. Federal Trade Commission also would regain authority over meatpacking and agricultural markets, which Congress stripped from the agency in the 1930s, leaving only the Justice Department to provide federal antitrust oversight of those markets.
The lawmakers also said foreign-owned companies like Brazil’s JBS NV will be required to divest U.S. assets, while ordering a “comprehensive study” of other foreign-controlled firms like Smithfield Foods Inc. and its recent acquisitions. The Virginia-based pork processor, which is owned by Hong Kong’s WH Group Ltd., earlier this year bought hot dog brand Nathan’s Famous.
JBS shares in the U.S. and Tyson Foods both fell to the lowest price in about a month, while Smithfield dropped as much as 2.9%.
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