White House Calls Out Meat Packer Profits
National Economic Council Director Brian Deese on Friday suggested that recent financial statements from America’s large meat processors show the companies used their market power to drive up meat prices and underpay farmers, tripling their own net profit margins since the start of the pandemic.
In an analysis published on the White House website, Deese said meat price are the biggest contributor to the rising cost of groceries, in part because just a few large corporations dominate meat processing. The November Consumer Price Index data demonstrates, Deese claims, that meat prices are still the single largest contributor to the rising cost of food people consume at home. Beef, pork, and poultry price increases make up a quarter of the overall increase in food-at-home prices last month.
National Economic Council officials studied earnings statements from Tyson Foods, the chicken producer and biggest U.S. meat company by sales; Brazil-based JBS SA, the world's biggest meatpacker; Brazilian beef producer Marfrig Global Foods SA which owns most of National Beef Packing Company; and Seaboard Corp RIC.
Those statements showed a 120% collective jump in their gross profits since the pandemic and a 500% increase in net income, the analysis shows. These companies recently announced $1 billion in new dividends and stock buybacks, on top of the more than $3 billion they paid to shareholders since the pandemic began.
In a statement, The North American Meat Institute called that analysis “another desperate attempt by the White House to shift blame for record food inflation to the meat and poultry industry.”
Meat Institute President and CEO Julie Anna Potts said the White House is guilty of “cherry picking” data and that it was no coincidence the blog post appeared the same day the Consumer Price Index showed gas and energy prices were up nearly 60% the past 12 months which is nearly 10 times the ratee of inflation for food.
“Beef, pork and poultry all have their own supply and demand market fundamentals,” Potts said. “The calculations used by the Economic Counsel awkwardly and misleadingly combine these sectors and the Council’s analysis conveniently excludes data on rising input costs, rising fuel costs, supply chain difficulties and labor shortages that impact the price of meat on the retail shelf. Plus, recent economic data indicates packer (wholesale) margins have fallen by 30-60 percent depending on the species as the industry works through the historic supply chain disruptions of the last 18 months.”
The analysis by the White House economic advisors said meatpacker profit margins have skyrocketed since the pandemic. “Gross margins are up 50% and net margins are up over 300%. Deese wrote. “If rising input costs were driving rising meat prices, those profit margins would be roughly flat, because higher prices would be offset by the higher costs. Instead, we’re seeing the dominant meat processors use their market power to extract bigger and bigger profit margins for themselves.”
The White House, hammered by Republicans over rising inflation, is scrambling to combat rising prices by clearing supply chain logjams and tackling what it views as uncompetitive practices by big companies, which are reporting big profit gains even as consumers suffer, Reuters reports.
Friday's blog - released after November consumer prices showed the largest annual gain since 1982 - reflects growing frustration by White House officials about continued increases in meat prices.
