US meat packers blame market forces for soaring prices as consumers seek alternatives

US – Meat packing companies in the United States have defended their profit making ventures against criticism from US lawmakers who hold the opinion that they manipulate the prices of their products.

At a Congressional hearing held by the House Agriculture Committee on Wednesday, executives from Tyson, JBS USA, Cargill, and the National Beef Packing Company denied any form of price fixing.

The executives from the companies, which combined control 82% of the market instead,  argued that market forces, not consolidation, were to blame for higher meat prices.

The price of beef in the United States has spiked 16% between March 2021 and March 2022, according to the Bureau of Labor Statistics. 

Tim Klein, CEO of National Beef Packing Company, said that one reason behind the higher beef prices is higher transportation costs and bottlenecks within the supply chain.

“The biggest single factor we’re dealing with right now is where we’re at in the cattle cycle,” Klein said. “There are simply more cattle available every week than there is demand capacity to process and scale.”

Tyson Foods CEO Donnie King, on the other hand, defended his company’s record-breaking earnings last quarter, saying that his company’s returns were “strengthened by our efforts to become a more agile and efficient company through innovation and automation.”

Gilles Stockton, a Montana cattle farmer and representative of the Montana Cattlemen’s Association, said in his testimony that the big meat packers exercise their power through “captive supplies,” or cattle that they either own outright or have an arrangement with producers to buy, Stockton said.

He charged that these arrangements allow beef companies to control prices and block a large number of farmers from competing.

Consumers seek cheaper alternatives

As beef prices continue to increase, consumers may begin to “trade down” when deciding which protein to purchase, CoBank said.

The bank in its recent analysis noted that chicken is the most likely beneficiary of this shift to cheaper alternatives.

CoBank’s projections are collaborated by USDA  which is also expecting a slight decline in beef consumption in 2022-23 as domestic supplies fall with shrinking cattle herds and growing exports.

Poultry producers like Tyson Foods and Pilgrim’s Pride stand to benefit from consumers cutting back on pricier proteins, even as they face challenges such as highly pathogenic avian influenza (HPAI) and higher feed costs.

Pilgrim’s Pride’s CEO Fabio Sandri said that the company is poised to benefit from changes in consumer behavior, stating that “chicken still remains the most affordable, flexible and available option relative to the other proteins.”

Meanwhile, Tyson CEO Donnie King said during the meat giant’s first-quarter earnings call that the company is upping its capacity to meet demand, as sales for the segment increased 37%.

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