Stifling lack of competition in meat packing industries

Joe Biden’s State of the Union address this month didn’t get the attention in Canada that a SOTU by a POTUS usually receives, likely because it took place against the backdrop of Russia’s invasion of Ukraine, and in the wake of Ottawa’s convoy crisis. But the American president’s speech called out, in blunt terms, a problem than Canada and the United both share: a stifling lack of competition in our meat packing industries. “I am a capitalist, but capitalism without competition is not capitalism. Capitalism without competition is exploitation, it drives up profits. When corporations don’t have to compete, their profits go up and your prices go up when they don’t have to compete,” Biden told his audience. “Small businesses and family farmers and ranchers — I need not tell some of my Republican friends in those states. You have four basic meatpacking facilities. That is it. You play with them, or you don’t get to play at all—and you pay a helluva lot more.” This isn’t the first time the White House has called attention to the oligopolies that dominate the U.S. meat industry, especially its beef sector. In the United States, four companies process 85 per cent of American beef: Cargill and Tyson, which are American-owned, and two Brazilian giants, JBS and Marfig Global Foods. According to an analysis published December 10, 2021, by the National Economic Council, profits for those four companies rose by 300 per cent in the last year. The NEC analysis showed a collective jump in gross profits of 120 per cent since the pandemic, and a 500 per cent increase in net income. The National Economic Council report, posted to a White House blog site, accuses the four giants of using their market power to drive up meat prices and underpay farmers and ranchers. Republican U.S. Senators Mike Rounds of South Dakota and Charles Grassley of Iowa, together with Democratic Senator Jon Tester of Montana have been working on legislation to create an office for a special investigator within the U.S. Department of Agriculture, to investigate corporate concentration and anti-competitive behaviour. The USDA itself has said it plans to strengthen enforcement of existing 100-year-old legislation created to protect farmers and ranchers from unfair trade practices; it’s also talking about possible government investment to increase meat processing capacity. In Canada, meanwhile, our problems might be even more acute. According to Agriculture Canada, 84 per cent of beef slaughter in Canada is done by just two companies: JBS, which operates a packing plant in Brooks, and Cargill, which has a huge plant in High River (and a much smaller one in Guelph, Ontario). Add in Harmony, a smaller Canadian-owned plant in Balzac, Alberta, and three companies alone account for 91 per cent of beef processed in Canada. It’s a highly efficient system for cattle producers and feedlot operators, at least the ones based in southern Alberta. But such intense concentration leaves Canada’s beef industry at risk if something goes awry. A major Covid outbreak. A strike. A serious supply chain disruption. Cattle producers and consumers are at the mercy of a system that is uniquely vulnerable, because it affords no room for flexibility. But even when the system is fully operational, cattle producers and consumers are captive to a market without competition. According to Alberta government data, prices for slaughter cattle and calves in Alberta stayed almost unchanged between January of 2021 and January of 2022. Over that same period, retail beef inflation in Canada rose 15.4 per cent. In the meantime, Statistics Canada’s beef consumption index shows a sharp decline since a peak in 2020. Yet while anti-competition rhetoric south of the border is heating up faster than a barbeque grill in June, the conversation about the risks and costs of corporate concentration in Canada’s beef packing industry has been relatively muted. Maybe it’s time, for the sake of the Canadian cattle industry, already battered by drought and supply chain woes, and for the sake of Canadians consumers, who just want to buy a steak without wincing, for us to talk turkey about the costs and consequences of a beef packing industry without real competition. Paula Simons was appointed to the Senate of Canada in 2018. She is deputy chair of the Senate's Agriculture and Forestry Committee and a member of the Senate's Transportation and Communications Committee. She is part of the Independent Senators Group. The Hill Times