To Fight Inflation, the White House Offers $1 Billion to Independent Meatpackers

To Fight Inflation, the White House Offers $1 Billion to Independent Meatpackers

© Reuters Photographer / Reuter

As part of an effort to combat inflation by fostering increased marketplace competition, the federal government will spend $1 billion to support independent producers of meat and poultry, the Biden administration said Monday.

In a statement announcing the move, the White House said the meatpacking industry is a “textbook example” of the market concentration that has contributed to the sharp increase in prices throughout the U.S. economy in recent months, with middlemen jacking up prices at the expense of both producers and consumers. According to data provided by the administration, four large meatpackers control 85% of the beef market, while the top four pork processors control about 70%.

“Capitalism without competition isn’t capitalism, it’s exploitation,” President Joe Biden said at a virtual meeting with farmers Monday. “That’s what we’re seeing in poultry and those industries now. Small independent farmers and ranchers are being driven out of business.”

Where the money will go: Under the terms of the plan, the U.S. Department of Agriculture will provide grants totaling $375 million to help diversify the meatpacking sector, and the agency will work with lenders to provide an additional $275 million in loans to finance expansion. About $100 million will go toward workforce development, $50 million will be spent on technical assistance, and $100 million will target reduced inspection costs for small producers. The funding will come from the $1.9 trillion American Rescue Plan signed into law last March.

Yes, but: With food prices rising more than 6% on annual basis – and beef prices up a remarkable 21% – the White House is anxious to get inflation under control. But experts are divided on whether market concentration and price gouging are really to blame for the recent burst of inflation.

Former Obama administration economist Larry Summers, who has been critical of the Biden administration’s spending plans, says that focusing on market concentration will have little effect on prices. “There is no basis whatsoever thinking that monopoly power has increased during the past year in which inflation has greatly accelerated,” he told The Washington Post.

Others are more optimistic about the plan. Scott Blubaugh, president of the Oklahoma Farmers Union, told Bloomberg News that he was happy to see the government taking on growing monopoly power. “Not since Teddy Roosevelt have we had a president that’s willing to take on this big issue,” he said.

Still, whatever role market concentration may play in the current jump in inflation, few experts think the Biden administration’s move will push prices much one way or another, especially in the short run. Don Close, an analyst at Rabobank, told the Post that the meatpacking industry is like much of the rest of the economy, with a reduced labor pool playing a big role in price increases. According to Close, entry-level wages in the industry have increased by about 50% since the beginning of the pandemic.