The North American Meat Institute (NAMI), which represents meat factories in the US, has forcefully rebutted the accusations made by the Biden administration, which accused them of being the cause of consumer price inflation for meat and abuse of dominant market position to squeeze out smaller competitors and exploit workers and farmer suppliers.
As well as calling out the big four beef processors which handle 85% of the beef processed in the US, the Biden administration is making a $1bn fund available to develop an independent processing industry in an attempt to counterbalance the power of the big processors.
It is questionable if a $1bn government grant fund to develop smaller processors will have much of an impact on the established players which are not just the biggest in the US, they are also the biggest globally.
There can be a debate about when corporations reach an unhealthy size and are bad for competition and development, but in the US, it is unlikely to be reversed by the proposed government intervention.
Robust factory pushback
What has been striking about events of the past week is how robustly the meat factories trade association has bushed back against the Biden administration.
It began by dismissing the presidential roundtable for not having a beef or pigmeat packer (processor) in attendance and went on to highlight the increased cost and lack of availability of labour during the pandemic, along with rising energy and transport costs.
Its final punchline is the fact that, this week, US factory prices are the equivalent of €4.60/kg, which is 90c/kg higher than this time last year. This includes adding 5% to reflect that the kill-out weight in the US is 5% higher than in Ireland.
The other element of the evidence-based rebuttal offered by the NAMI is the compression of the margins at different points in the chain going back to 1994.
This USDA data shows the margins at each step of the chain from the suckler farmer, through the feeder and, finally, the big four processors.
This shows a relatively consistent pattern of margins, with highest farmer margins coinciding with low or negative factory margins and vice versa, but realignment followed in subsequent years.
Debate informed by facts
The fact that US factories can present such a forceful rebuttal is enabled by the level of insight that everyone has to where the value lies in the US meat sector.
Data is collected on all cattle going into factories and wholesale meat values and sales are published, in some cases, twice daily. All of the major processors publish quarterly accounts, accompanied by trading statements.
They had an exceptional year in 2021 and, no doubt, low cattle prices in the first half of 2021, combined with a buoyant meat market, created the opportunity for big profits.
Farmgate prices have increased significantly in the final quarter of 2021, so value being returned to farmer suppliers has increased as cattle numbers tightened.
Higher cattle costs, combined with higher factory operating costs in a buoyant global beef market, has meant factories are able to pass higher costs on to the consumer level in the supply chain.
Irish factories would benefit
The lesson from this week’s events in the US is that the meat processing industry has a plausible push-back against the allegations made by the Biden administration.
If a similar debate arose in Ireland, as it has done in the past - albeit farmer-, not Government-led - there would be a complete absence of visible hard data for factories to defend their corner.
This creates a mistrust and a lack of confidence in factory fairness and usually occurs at times when market conditions are poor and rarely, if ever, when prices are good.
If the level of detail was published in Ireland as is in the US, factories would be able to defend their position much more convincingly and create farmer confidence in the process. Nobody should fear transparency.