Consolidation among meat packers is dangerous. Big government is the cause


Timothy P. Carney, Op-Ed, Washington Examiner

via American Enterprise Institute - May 20, 2020


Pork and beef are running low in grocery stores. Cattlemen and pig farmers are suffering as they have nobody to buy their livestock. And slaughterhouse workers are dying of the coronavirus.


We have a crisis in American meat caused by consolidation. “Big Meat” has become a bad guy amid this pandemic, and rightly so. Liberals, of course, blame a lack of regulation. Economic nationalists such as Sen. Josh Hawley are calling for antitrust investigations.


But when consolidation is the problem, and in meat processing, it really is, big government often turns out to be the problem, not the solution.


In few industries are the “bigs” as big as they are in meatpacking. Three firms, Tyson, Cargill, and Brazil-based JBS, process two-thirds of the beef in the United States. And they do it in relatively few plants.


As a result, when coronavirus outbreaks shut down just 12 slaughterhouses, that reduced U.S. pork production by 25% and beef by 10%, according to Bloomberg News.


This chart shows what’s happening... [chart]


The meat processing plants are becoming a choke point. That means more profit for Smithfield, Tyson, Cargill, and JBS. There are few buyers who can make use of the animals, so they can buy them cheap. And there are few sellers of the butchered meat, meaning they can sell them dear.


“It is a really good time for those that can operate, even if they’re not operating at full capacity.”


At the same time, it means economic pain for ranchers and shortages for U.S. consumers, to say nothing of the danger to workers at the plants.


“This is 100% a symptom of consolidation,” Christopher Leonard, told Bloomberg. “We don’t have a crisis of supply right now. We have a crisis in processing. And the virus is exposing the profound fragility that comes with this kind of consolidation.”


How did this happen? How did we get to the point where so much of our meat goes through so few processors?


Largely, the culprit is regulation. And in part, it was regulation aimed specifically at encouraging consolidation. Government planners believed the country would be better off with fewer, bigger meat processors. Oops.


Teddy Roosevelt, riding on the wave created by Upton Sinclair’s The Jungle, first advanced mandatory federal meat inspection. “We are now and always have been in favor of the extension of the inspection,” Thomas E. Wilson of the American Meat Institute told Congress in 1906. Big Meat also supported “the adoption of the sanitary regulations that will ensure the very best possible conditions.”


When Roosevelt eventually instituted federal meat inspection, Sinclair himself lamented, “The Federal inspection of meat was, historically established at the packers’ request … for the benefit of the packers.”


Historian Gabriel Kolko wrote that the regulations “primarily affected their innumerable small competitors.” In the words of Sen. George Perkins, the regulations also gave the big packers, in effect, a “government certificate on their goods.”


For similar reasons, Kellogg and the Grocery Manufacturers of America teamed up with the Obama administration in 2009 to push for passage of the Food Safety Modernization Act. The big producers can afford the added overhead that strict regulation imposes, whereas the small guys can’t. To add insult to injury, the big guys tend to hire up the bureaucrats and congressional staffers who write the rules in the first place. These revolving-door travelers act as lobbyists and lawyers to help tweak or navigate new regulations.


In Montana, small meatpackers believe federal regulators were targeting small plant...


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