* Center Square…
[Tom Eikman, owner of Eikman’s Processing in Seward, Illinois, a small-sized, third-generation meat processor] said he expects high meat prices to continue into next year. Because of big time consolidation, most of the meat in Illinois stores comes from four giant meat processing conglomerates. Mid-sized meat processors who used to provide competition have all been absorbed by the big four.
Big Agriculture dictates the meat prices, Eikman explained. His processing plant could undercut them in the short term and sell steaks below their market rates. However, word would quickly get out and Eikman would run out of the inventory.
So his hands are tied. He has no choice but to fall in line and charge market rates, he argued.
If there were eight giant meat processing conglomerates rather than just four, the situation might be a little better for farmers and consumers, Eikman said. In Southern Illinois, Saline River Processors is setting up a large meat processing plant with the power to compete with the big four. The company hopes to be up and running in the fall of 2022.
* The White House has a blog, which I didn’t know about until reading something about meat prices on Twitter this weekend. Anyway, that blog took a look at the situation, and Mr. Eikman appears to be correct about this…
In September, we explained that meat prices 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 released this morning demonstrates 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.
As we noted in September, just four large conglomerates control approximately 55-85% of the market for pork, beef, and poultry, and these middlemen were using their market power to increase prices and underpay farmers, while taking more and more for themselves. New data released in the last several weeks by four of the biggest meat-processing companies—Tyson, JBS, Marfrig, and Seaboard—show that this trend continues. (Other top processors are private companies that don’t report publicly on their profits, margins, or income.) According to these companies’ latest quarterly earnings statements, their gross profits have collectively increased by more than 120% since before the pandemic, and their net income has surged by 500%. They have also recently announced over a billion dollars in new dividends and stock buybacks, on top of the more than $3 billion they paid out to shareholders since the pandemic began.
Some claim that meat processors are forced to raise prices to the level they are now because of increasing input costs (e.g., things like the cost of labor or transportation), but their own earnings data and statements contradict that claim. Their profit margins—the amount of money they are making over and above their costs—have skyrocketed since the pandemic. Gross margins are up 50% and net margins are up over 300%. 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. Businesses that face meaningful competition can’t do that, because they would lose business to a competitor that did not hike its margins.
As one large meat-processing firm noted to investors during its earnings call, their pricing actions “more than offset the higher COGS [cost of goods sold].” Comparing the fourth quarter of 2021 to the same quarter in 2020, that same firm increased the price of beef so much—by more than 35%—that they made record profits while actually selling less beef than before.
In addition to a crackdown, the feds are pumping a billion dollars in lending capital to expand processing capacity.
* More on the afore-mentioned Saline River Processors, which is receiving funding from the US Department of Agriculture…
Williamson County was competing with a location in Kentucky for this project as part of the USDA’s efforts to increase capacity and diversify processing facilities across the United State.
“We have received tremendous support from the cities of Marion, Herrin, and Creal Springs and have worked tirelessly with Congressman Mike Bost, State Senator Dale Fowler, Governor JB Pritzker’s office, Williamson County Board Chairman Jim Marlo, and other elected officials to bring these career jobs to southern Illinois”, said Ted Hampson, a spokesperson for Saline River Farms, LLC.
- Cool Papa Bell - Monday, Dec 13, 21 @ 11:41 am:
No one wants to know how the sausage is made here.
The chicken industry is the WORST. Years of price fixing and keeping the farmers that raise the chickens covered in debt as contract farmers. The pig industry is now leaning the way of the chicken industry. Huge corporations “own” the hogs that they give to farmers to raise - then buy them back to slaughter and pack and ship.
The beef market is “freest” livestock market but the packer controls so much of the back end that there isn’t much price discovery for a cattle producer.
Look at the price of box beef vs what the industry was paying for live cattle for the past 12 months. Cattle producers were getting less while JBS, ect where selling those chopped up cows for more and more. As you can see, record profits.
I wish all the best to Saline and everyone else who tries and make this work - but JBS (just JBS) slaughters roughly 22,000 to 28,000 cows a day. Saline wants to start by slaughtering 2,800 a week. We need local packers but its a drop in the bucket to impact what the Big 4 are able to do.
Still - hats off to USDA and even DECO using dollars and resources to help local processing grow in Illinois.
- Anyone Remember - Monday, Dec 13, 21 @ 11:55 am:
Center Square is talking about how the Free Market doesn’t work? [Sarcasm font on] Oh, I do declare, I have a case of the vapours!
- Donnie Elgin - Monday, Dec 13, 21 @ 11:59 am:
Look for local USDA processors that sell direct - eliminate the middle man and get you meat/pork even fresher. Jasper meats in Bloomingdale is open for direct sales on Saturdays.
- Rich Miller - Monday, Dec 13, 21 @ 12:04 pm:
===processors that sell direct===
That Saline River company will be doing that.
- Anon221 - Monday, Dec 13, 21 @ 12:06 pm:
Buying local meat helps ensure that local butchers/processors have enough livestock coming through to sustain them. A lot of times it doesn’t require buying a 1/4 or 1/2 beef or hog anymore. The changes made over the years to local foods legislation and regulations have helped many new small farmers create more value-added products, sometimes even out of their own stores. Even a commitment to use 10% of your grocery buying power for local meat will have a significant impact. And it’s not just beef, pork, and chicken. In my area I can also get rabbit, guinea fowl, quail, and turkey.
- Red Ketcher - Monday, Dec 13, 21 @ 12:23 pm:
Behrmann Meats , Albers , IL
USDA Bonded Family Operation
Have an On Premise Store at Plant
As well as extensive Wholesale/Retail Routes
Springfield Included
Experience has been very positive
Glad to support Local Business & Producers
- Publius - Monday, Dec 13, 21 @ 12:27 pm:
Where does Corporate farmer Senator Bailey stand on this?
- Dan Johnson - Monday, Dec 13, 21 @ 12:40 pm:
This is good news. Definitely time for new laws to reflect the reality of corporate consolidation in so many of our industries. And in DC this is a bipartisan issue (lots of the new antitrust bills are bipartisan — Republican Senator Chuck Grassley of Iowa is a big proponent).
- Fav Human - Monday, Dec 13, 21 @ 12:50 pm:
new antitrust bills
Anti-trust is what we need. I do wonder why the current ones aren’t enough though.
- Candy Dogood - Monday, Dec 13, 21 @ 1:02 pm:
Concentration within the meat packing industry has been going on for quite some time, this isn’t a new problem, or a new concern, it’s just something that the last few Presidential administrations and the USDA haven’t really taken very seriously. Major packing plants across the country were closed in favor of consolidation of those private industries much to the detriment of the communities where those plants were located.
To make matters worse, the same agribusiness conglomerate will own every aspect of the production of meant and reduce the folks who operate the CAFOs to contract workers as they take the risk for building the structures and are paid per hog raised, but do not own the hogs outright and are also abused by the system in place.
Name checking Senator Grassley is also entertaining since he hasn’t lifted a finger to stop this consolidation from taking place at all.
===We have received tremendous support from the cities of Marion, Herrin, and Creal Springs===
Somehow the location wound up being relatively close to Marion. I hope the good people of Marion are ready to experience an odor of industry of which they are not accustomed to.
- Cool Papa Bell - Monday, Dec 13, 21 @ 1:19 pm:
Two worthy small markets to mention here, selling local foods too are the Great Scott Market in Winchester, IL and the Market on the Hill in Mt. Pulaski. Great examples of what can be done when small towns pull together.
- very old soil - Monday, Dec 13, 21 @ 1:35 pm:
Last I heard from a pork producer, Eikman can’t process more because they can’t get help.
- very old soil - Monday, Dec 13, 21 @ 1:36 pm:
What do you think the people of Saline County will think of the people that come to work in that plant.
- Dan Johnson - Monday, Dec 13, 21 @ 1:43 pm:
Much of federal antitrust law is judge-made. Senator Klobuchar wrote a good book on the topic called (surprisingly) Antitrust that came out this year. So (mostly) Federalist Society judges have knocked out most of the meat (so to speak) of antitrust law since the federal text of the statute is pretty light.
https://www.penguinrandomhouse.com/books/586000/antitrust-by-amy-klobuchar/
- flea - Monday, Dec 13, 21 @ 2:53 pm:
the meat processong industry is an exceptionally competitive low wage industry. I am with “very old soil” in terms of who do they think will work in the plant? It’s an ugly , stinky, accident prone workplace.
- Cheryl44 - Monday, Dec 13, 21 @ 2:54 pm:
You could just not eat meat at every meal.
- TinyDancer(FKASue) - Monday, Dec 13, 21 @ 3:05 pm:
Big Ag is anti-competitive?
I’m shocked. Shocked.
There oughta be a law.
Oh, wait. There is.
But corporate money’s got Congress tied up in knots.
This reminds me of Ned Beatty’s Network speech:
https://www.youtube.com/watch?v=yuBe93FMiJc
- Cool Papa Bell - Monday, Dec 13, 21 @ 3:23 pm:
@flea - I’d agree if your talking industrialized slaughter facilities. But the new ones that are built like this are much better. Rabers in the Peoria area is fantastic. They rebuilt after a fire. I’m not saying the kill floor is a great place to be - but the line speed and pressure to cut and chop is a far better place than a big packer.
- Unconventionalwisdom - Monday, Dec 13, 21 @ 5:45 pm:
Prices are really high. Hope this leads to some decent wages for the workers. Wages that attract our own citizens. This is hard work and needs to be paid really good wages like it did in the past. Before buyouts. unions busted and importation of labor.