Log in Join Grass Roots Action

North American Meat Institute: Market Fundamentals Drive the Beef & Cattle Market

Wednesday, June 23, 2021
 

WASHINGTON, DC – The North American Meat Institute (Meat Institute), the largest and oldest trade association for packers and processors of beef, pork, lamb, veal and turkey today said market fundamentals drive the beef and cattle market and additional government intervention will have unintended consequences for livestock producers, packers and consumers.

“Long time critics of the meat and poultry industry are again proposing additional regulations and shortsighted market interventions that do not consider the basic laws of supply and demand. Many of these proposals have already failed in practice or before the courts,” said Meat Institute President and CEO Julie Anna Potts. “The beef market is dynamic, with recent challenges due to labor shortages and the COVID pandemic rather than problems with market structure.

“The members of the Meat Institute – and their livestock suppliers – benefit from, and depend on, a fair, transparent and competitive market. The North American Meat Institute is prepared to discuss these issues and work with the Administration and the Congress on the issues facing the industry.”

The Meat Institute made these remarks in written testimony submitted to the U.S. Senate Committee on Agriculture, Nutrition and Forestry for a hearing entitled, “Examining Markets, Transparency, and Prices from Cattle Producer to Consumer.”

The testimony provides a comprehensive picture of the dynamic and growing beef industry and an analysis of rhetoric surrounding oversight of the market, antitrust issues and the market forces at play.

Of particular interest is a new analysis (pages 8 and 9 of the testimony), using USDA data, of the profit margins of the three sectors of the fed cattle industry: cow-calf producers, feeders and packers. The data show that over the last 25 years, while the four-firm concentration ratio in the fed cattle market has remained relatively constant, it has not ensured packer profitability at the expense of producers.

“No sector – cow-calf, feedlot, nor packer – has realized positive margins every year,” Potts said. “For example, the four-firm ratio in 2014, when cow-calf and feedlot profit margins were at record highs, was the same as in 2017 when all three sectors showed positive margins. However, over this 25-year timeline, the cow-calf sector incurred negative margins the fewest number of years of the three.”


Historical Margins

In addressing calls for additional packer capacity as a solution to the challenges due to the COVID pandemic, the testimony demonstrates that packer capacity is already growing as a result of market forces, without government intervention.

2020-2021 Publicly Announced Beef Packing Capacity Expansion
 Packer Announced Capacity hd/day State Est Investment Ownership Est on-line
Date Action
AgriBeef/
True West
Aug 2020
New Plant
500
ID
 
Producer
TBD
FPL
Oct
2020
 
Expansion
500
GA
$120 mln
FPL
Q42021
Iowa Premium/ National Beef
Mar 2021
 
Expansion
1,250
IA
$100 mln
National Beef
Q42022
Sustainable Beef
Mar 2021
 
New Plant
1,400
NE
$300 mln
Feeder
TBD
Missouri Prime
Mar 2021
 
Converted pork plant
500
MO
 
NexGen, feeders
Mar 2021
JBS
Jun
2021
 
Expansion
1,050
NE
$150 mln
JBS
Q42021
American Foods Group
Jun
2021
New Plant
TBD
WI
 
AFG
TBD
TOTAL
5,200 +

“These new entrants or company expansions were based on decisions to build or expand based on market conditions, not because of government intervention. Government interference into the market could well undermine this industry growth,” said Potts.

“During the pandemic, small and midsize beef slaughter and processing companies endured the same challenges large companies faced, perhaps more so. Artificially creating more, smaller regional harvest facilities will not prevent future market disruptions nor protect cattle producers from cyclical or volatile markets. The unintended outcome could be the opposite.”

For additional information about beef markets see the Meat Institute’s Facts about Common Meat Market Myths and the Meat Institute’s comments submitted earlier this week in response to U.S. Secretary of Agriculture Tom Vilsack’s request for comments on efforts to improve supply chains for the production of agricultural commodities and food products. The Meat Institute has several resources about beef markets here. And for more on the pandemic and its effect on the meat and poultry industry, go here.

About North American Meat Institute

The North American Meat Institute is a leading voice for the meat and poultry industry. The Meat Institute’s members process the vast majority of U.S. beef, pork, lamb, and poultry, as well as manufactures the equipment and ingredients needed to produce safe, high quality meat and poultry products.

 share on facebook  share on twitter