Oscar Wilde once said that “life imitates art,” but when a spokesperson for the North American Meat Institute tries to be Obi Wan Kenobi, it just doesn’t work.

Edouard Lotterman

The Jedi Mind’s grand trick of saying “these aren’t the droids you’re looking for” might baffle a squad of Stormtroopers, but a deli flack claiming “focus has nothing to do with the price.” , rightly causes little laughter.

The packaging of meat and poultry is a very concentrated industry. The gap between what farmers and ranchers get from consumers’ meat purchases and the share captured by packers is widening. Consumers currently pay significantly higher prices for meat, especially beef. Meat prices, as well as fuels for vehicles and home heating and new and used vehicles, stand out as specific contributors to recent increases in the consumer price index.

President Joe Biden recently announced an initiative to reduce meat prices and close the gap between the prices paid by consumers and the prices received by ranchers. The actions will include a renewed enforcement of existing laws, particularly the Packers and Stockyards Act of 1921. That had eroded during the Trump administration, to put it politely. There will also be start-up grants for specialty packers to increase competition, increased funds for meat inspectors and other measures.

The issue is notable in that in the current highly partisan Congress there is bipartisan support on this issue, including Charles Grassley of Iowa, a senior and highly influential member of the GOP caucus. In addition, the GOP’s shift towards populist nationalism portends a lower voice for the interests of business and the financial sector. So some change may occur, up to a point.

The issue of meat packaging is complicated. It has also become a proxy for monopoly power in many sectors and for the general abandonment of federal anti-monopoly enforcement over the past 20 years. All of this cannot be covered in one column.

However, understand the following points.

• Biden initiatives are necessary and can prove useful, but their effects on high meat prices and increasing gaps between animal producers and meat packers will not be visible in the short term. This does not mean in time to affect current CPI increases or to factor in the 2022 and 2024 national elections.

• It’s an old problem. Ironically, the monopoly price abuses in meat packaging, highlighted as a side effect of a national focus on unhealthy meat spurred by Upton Sinclair’s 1906 novel “The Jungle”, have been key. anti-monopoly actions of the “progressive era” over a century ago. The fact that the Slaughterhouses and Stockyards Act dates from 1921 shows that the effects on cattle ranchers are as old a problem as consumer prices at the meat counters.

• The issue of monopoly power has captured the attention of economists for many decades. Yet the old indicators of “structure, conduct, and performance” disappeared after a libertarian-leaning “law and economics” group at the University of Chicago convinced most economists that in the absence of increase in consumer prices, a small number of companies and their dominant business practices were irrelevant.

• Despite the focus on the damage done to meat industry input producers (pastoralists and farmers) a century ago, this aspect of the concentration of middlemen has received little attention in recent years. decades. Unlike new economy service sellers like Facebook or Twitter who do not buy physical commodities, collusive monopoly sellers of meat to consumers are “monopsonous” buyers of live animals. Basic economic theory shows that such market power in the purchase of livestock can lead to unfair income sharing and economic inefficiency on the input side. Likewise, excessive market power on the meat production side unfairly transfers money from consumers to middlemen and further wastes resources.

• Understand, however, that monopoly power does not guarantee perpetual prosperity for existing businesses. Now almost forgotten, economist John Kenneth Galbraith convinced much of the general public of the 1950s and 1960s of the dangers of big business. But the companies he had in mind – General Motors, US Steel, IBM, Kodak, the New York Central Railroad and Pan American Airlines – either went bankrupt or reinvented themselves in changing market conditions.

• Four companies now control 81 percent of beef packaging, but none of the four were in business by the mid-20th century. And the famous ‘big four’ abusive companies of 120 years ago, including Armor and Swift, are gone, as are regional players like Morrell. Structural changes, including the geography of cattle feed sites and packing plant technology, are the primary reasons for this transformation.

• By the mid-decades of the 20th century, the packer unions had real power and captured some of the monopoly and monopsony profits of the packaging companies. But these unions were ultimately all dismantled. Today, packing plant workers are among the most helpless in the American workforce, in large part because so many of them are immigrants, many here illegally. Additionally, while meat hygiene and unsafe working conditions have improved significantly from the nightmarish situations Sinclair described, packing plants remain unpleasant and dangerous workplaces.

• Aside from the current extreme beef and pork prices, the long-term trends in consumer livestock and meat prices over the past century are steadily declining when adjusted by price indexes at. consumption or GDP. The decline in per capita consumption of red meats – beef, pork and lamb – combined with the increase in poultry consumption is a major factor.

• Lower real prices for livestock or retail meats do not inherently mean lower incomes for farmers. Productivity increased rapidly, and the real value produced per hour of labor or dollar of machinery increased dramatically, as in all the rest of agriculture. Thus, agriculture does not need to be unprofitable if the downstream end of the enterprise had less bilateral monopoly buying and selling power.

• Despite the mandate of land granting universities to serve the general public, applied economics departments have recently devoted less resources to competition issues in the livestock sector than in the past. Type into your favorite search engine various combinations of the terms “breeding”, “meat packing”, “monopoly”, “concentration” or “farm gate price”. You will get many citations from scientific articles and agricultural magazines from 1900 to 2005, but very few in the last few years. Few recent doctorates. theses are devoted to these questions. The current public and congressional attention to the issues may prompt more work, but it takes time to get research results into the pipeline.

All of this serves as a backdrop for specific questions to be explored in the weeks and months to come.

St. Paul’s economist and writer Edward Lotterman can be contacted at [email protected]