The Biden administration has been taking steps to tame inflation, which hit almost a four-decade high in November 2021. Rising food prices, especially meat prices, have been a cause of concern for many American families. President Joe Biden has announced steps to help bring meat prices down. What are these steps and will they help bring meat prices down?
Rising inflation has been a big concern for policymakers. The Federal Reserve doesn't call it “transitory” anymore and will end its bond-buying program within the first quarter of 2022, which will be followed by rate hikes.
U.S. meat prices have been rising at a fast pace.
The food inflation in the U.S. has been running above the headline CPI numbers. For example, in November 2021, prices for poultry, meat, and eggs increased 12.8 percent while the CPI stood at 6.8 percent.
Why are meat prices so high?
Meat prices have been going up for multiple reasons. First, there has been cost-push inflation. There have been higher prices for animal feed and packaging materials. Transportation costs and labor costs have also risen. Several industries have been facing a demand-supply mismatch. The meat processing industry is struggling to find labor and operate plants at full capacity.
Is the meat processing industry profiteering?
Biden said that the meat processing industry’s profits have swelled since the COVID-19 pandemic started. Analysis by the White House economic council showed that the gross profits of the four biggest meatpackers—JBS SA, Tyson Foods, Cargill, and National Beef Packaging Company—increased by 120 percent.
There's merit in the argument. Scrolling through Tyson Foods' financials, in the last 12 months while sales have increased around 9 percent, the gross profits have increased by 16.3 percent. The gross profit growth of JBS SA was also ahead of the revenue growth over the last 12 months.
What’s Biden doing to bring down meat prices?
Biden has attributed high meat prices to a lack of competition in the meat processing industry. Commenting on the alleged monopoly in the meat processing industry, where the top four players control an estimated 85 percent of the market, Biden said, “Capitalism without competition isn’t capitalism. It’s exploitation.”
The Biden administration will invest $1 billion to support small and independent meatpackers in a bid to create more competition in the industry. These efforts are already underway and the U.S. Department of Agriculture will increase the funding.
The Biden administration will also tighten the norms on what meat products can be called “Product of USA” amid allegations that cattle raised abroad and slaughtered in the U.S. are also being labeled as a U.S. product.
The meat processing industry isn't impressed with Biden's plan.
The meat processing industry isn't impressed and wants the Biden administration to address the labor shortage situation and the overall inflation in the industry. The industry says that it's being singled out even though prices across the board are going up amid higher input and transportation costs.
There isn't much that Biden can do in the short term.
Overall, there isn't much that Biden can do to tame prices in the short term. The rising caseload of new coronavirus cases amid the rapid spread of the omicron variant of the COVID-19 virus will likely add to the ongoing labor shortage and supply chain issues. The expansionary fiscal policy pursued by the Biden administration is also inflationary.
For now, rising inflation is taking a toll on Biden’s popularity and will also spoil the Democrats’ chances in the U.S. midterm elections.