California Ag Network

Tag: NAMI

  • Cost of Beef for Consumers Stable Since 1994

    Looking for a scapegoat for economy-wide inflation, the Biden administration has alleged that meat and poultry industry concentration is to blame for rising consumer prices. The truth is not so convenient.

    Using USDA’s meat industry concentration data, the chart below demonstrates that, although the four-firm concentration in fed cattle beef packing has remained relatively constant since 1994, the Consumer Price Index (CPI) for beef has been variable over that same period; sometimes above and sometimes below the overall CPI.
    If concentration is causing the recent rise in consumer prices for meat and poultry products, then why did concentration not cause inflation five or ten years ago?

    In fact, the December CPI showed prices for meat dropped slightly, yet concentration remained the same.

  • 2022 Annual Meat Conference Cancelled

    The North American Meat Institute (NAMI) and FMI – The Food Industry Association (FMI) today made the difficult decision to cancel the 2022 Annual Meat Conference (AMC) out of respect for the health of our communities and due to the attention and consideration our respective members are putting into their operations.

    “The purpose of AMC is to bring together retailers and the meat and poultry industry,” said NAMI President and CEO Julie Anna Potts. “Like the meat and poultry industry, many of our partners in retail are experiencing significant operational and supply chain challenges. At this time, attending an in-person conference is difficult which diminishes the value of the event for all participants.”

    FMI President and CEO Leslie G. Sarasin commented, “Our community is prioritizing the health of its people and operations so that we will be able to continue to serve the shopper, but we are committed to sharing additional category insights with our audiences throughout the year.”

    A full refund will be issued to all attendees, exhibitors and sponsors, and event coordinators will cancel hotel reservations on behalf of registered attendees. 

    While the in-person event is canceled, NAMI and FMI, in partnership with Sealed Air, will host a virtual discussion series regarding The Power of Meat analysis. The kickoff to this three-part series will be hosted beginning February 7. Registration information will be available via the conference website and in a follow-up communication to previously registered attendees. The analysis will also be available for free to members of our respective organizations and previously registered attendees.

    About the 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 manufacturing the equipment and ingredients needed to produce safe, high quality meat and poultry products. www.meatinstitute.org

    About FMI:

    As the food industry association, FMI works with and on behalf of the entire industry to advance a safer, healthier and more efficient consumer food supply chain. FMI brings together a wide range of members across the value chain — from retailers that sell to consumers, to producers that supply food and other products, as well as the wide variety of companies providing critical services — to amplify the collective work of the industry. www.fmi.org

  • India’s Market Opens up to US Pork Imports

    The North American Meat Institute (Meat Institute) welcomed India’s decision to allow imports of U.S. pork and pork products into the country and thanked the Biden Administration for working to secure increased access for high-quality U.S. meat products to this growing and strategically important export market.

    “U.S. pork producers, processors and packers are going to benefit from the expanded market access that this agreement will bring,” said Meat Institute President and CEO Julie Anna Potts. “The Meat Institute is grateful to USDA and USTR for their years of hard work to achieve this outcome.”

    This decision, announced yesterday by U.S. Agriculture Secretary Tom Vilsack and U.S. Trade Representative Katherine Tai, marks the first time India will allow U.S. pork into the country. The development comes after decades of negotiations between the two countries and the successful revitalization of the U.S.-India Trade Policy Forum held in New Delhi last November.

    In 2020, the United States was the world’s third-largest pork producer and second-largest exporter, with global sales of pork and pork products valued at $7.7 billion.

    About the 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.

  • Government Intervention in Markets Will Not Help Consumers or Producers

    The North American Meat Institute, the nation’s trade association for meat and poultry packers and processors of all sizes, released the following statement regarding the “The Biden-Harris Action Plan for a Fairer, More Competitive, and More Resilient Meat and Poultry Supply Chain.”

    “For the third time in six months, President Joe Biden and his Administration announced the same plans to spend $1 billion to fund government intervention in the market in an attempt to increase prices livestock producers receive while blaming inflation on private industry,” said Julie Anna Potts, President and CEO of the North American Meat Institute. “The Biden Administration continues to ignore the number one challenge to meat and poultry production: labor shortages. This tired approach is not surprising because they have refused to engage with the packing and processing sector they attack, going so far as to hold a roundtable on meat packing without a single beef or pork packer present.

    “Press conferences and using taxpayer dollars to establish government-sponsored packing and processing plants will not do anything to address the lack of labor at meat and poultry plants and spiking inflation across the economy,” said Potts. “The Administration wants the American people to believe that the meat and poultry industry is unique and not experiencing the same problems causing inflation across the economy, like increased input costs, increased energy costs, labor shortages and transportation challenges. Consumers know better.”

    “As economists predicted, producers are seeing higher prices for their cattle because packers have processed the backlog of animals in the system.”

    The Biden Administration has claimed industry structure is keeping down prices cattle producers receive for their animals, conveniently ignoring the fact the beef industry has changed little for almost 30 years.  Prices reflect supply and demand in a healthy market.

    On December 26, 2021, Larry Summers, Secretary of the Treasury for President Clinton, the Director of the National Economic Council for President Obama and Charles W. Eliot Professor and President Emeritus at Harvard University took to Twitter agreeing with leading agricultural economists highly critical of the Biden Administration’s analysis. He tweeted:

    “The emerging claim that antitrust can combat inflation reflects ‘science denial’. There are many areas like transitory inflation where serious economists differ. Antitrust as an anti-inflation strategy is not one of them.”

    Summers also said on Twitter, “Monopoly may lead to high prices but there is no reason to expect it to lead to rising prices unless it is increasing. There is no basis whatsoever thinking that monopoly power has increased during the past year in which inflation has greatly accelerated.

    “Rising demand, with capacity and labor constraints, are fully sufficient to account for what we observe in meat packing — Administration claims notwithstanding,” tweeted Summers.

    “Breaking up meatpacking would in the short run lead to reduced supply which would further increases prices. In general, when government goes to war with industries it discourages investment and subsequent capacity.”

    The chart below shows that since 1994, profit margins have varied between all sectors of the fed cattle market with no one sector benefiting consistently at the expense of another.

    And, according to USDA Data, fed cattle prices are rising on their own, without government intervention. Fourth quarter 2021 fed cattle prices are the highest in five years (even as wholesale beef prices have followed seasonal demand and decreased steadily since Labor Day, the end of the traditional annual high demand period).

    The “new” announcement raises several questions that need to be answered, including:

    • How much extra packing plant capacity does the administration think is needed? 
    • How high should cattle prices be right now? 
    • How long will the government sponsored processors receive government money? 
    • How much will the government sponsored processors be required to pay employees? 
    • There are many small and medium sized packers in the market today that have never received government support – how will they be affected by the influx of government-sponsored competition? 
    • When will these new plants come on-line? 2024-2025?  What impact will that have now?
    • Where are the target areas these plants are needed?
    • Will the new plants have sufficient labor?

    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.

  • North American Meat Institute to CDFA: Modified Prop 12 Rules Remain Flawed; More Time Needed

    In comments submitted to the California Department of Food and Agriculture (CDFA), The North American Meat Institute (NAMI) said, despite modification to proposed rules for Proposition 12 (Prop 12 or the law), the proposed rules remain flawed and more time is needed for compliance.

    “Until CDFA publishes final rules, no one can adequately prepare to comply with a law with criminal sanctions and that authorizes civil litigation,” said Mark Dopp, General Counsel and Chief Operating Officer at NAMI. “Rather than apply ‘band aids’ to address some challenges, NAMI suggests CDFA go further and afford everyone in the supply chain, from hog producers all the way to foodservice and retail entities, the 28-month preparation time the law, and the voters, contemplated before enforcing any aspect of Prop 12 or its regulations.”

    For the text of the comments, go here.

    Although CDFA modified the proposed rules and are to be applauded because they account for complexities in the supply chain or they bring the proposal more in line with the law, unfortunately, many parts of the May 2021 proposed rules remain intact and flawed. NAMI identified these flaws in its July comments and during the August public hearing.

    Prop 12 directed CDFA to promulgate regulations implementing the law by September 1, 2019. The rules are yet to be finalized even though some provisions take effect January 1, 2022.

    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.

  • White House Economic Council Not Very Economic

    The North American Meat Institute (Meat Institute) today dismissed another desperate attempt by the White House Economic Council to shift blame for record food inflation to the meat and poultry industry.

    “The White House Economic Council is again demonstrating its ignorance of agricultural economics and the fundamentals of supply and demand,” said Meat Institute President and CEO Julie Anna Potts. “This argument is simply a rinse and repeat of their September attempts to blame meat and poultry companies for inflation that is not limited to food, but is being felt across the economy.

    “Beef, pork and poultry all have their own supply and demand market fundamentals. The calculations used by the Economic Counsel awkwardly and misleadingly combine these sectors and the Council’s analysis conveniently excludes data on rising input costs, rising fuel costs, supply chain difficulties and labor shortages that impact the price of meat on the retail shelf. Plus, recent economic data indicates packer (wholesale) margins have fallen by 30-60 percent depending on the species as the industry works through the historic supply chain disruptions of the last 18 months.

    “This cherry picking of data is obvious to all. It is no coincidence this blog post appears on the same day as the Consumer Price Index is released showing gas and energy prices are up nearly 60 percent over the past 12 months which is nearly 10 times the rate of inflation for food.

    “The Economic Council continues to insist market structure is the reason for higher consumer prices of meat and poultry. In beef production for example, the same four firm concentration ratio has been operating in the market for nearly 30 years. Why the sudden inflation?

    “The answer is consumer demand for meat and poultry products has never been higher. Members of the Meat Institute are producing more meat than ever before under extraordinary circumstances to keep our farm economy moving and to put food on American’s tables.”

    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.

  • Meat Institute: Grassley-Fischer Bill Ignores Economic Fundamentals

    The North American Meat Institute said a new Senate bill ignores the analysis of beef and cattle markets by the country’s leading agricultural economists and the bill’s mandated government intervention will have unintended consequences that will hurt livestock producers and consumers.

    “Beef and cattle markets are dynamic. This fall prices cattle producers received for their livestock have risen without any government interference,” said Julie Anna Potts, President and CEO of the North American Meat Institute. “In a rush to do ‘something,’ this bill would replace the free market with government mandates and harm those it is intended to protect: livestock producers.”

    The Senate bill, which was announced but apparently not finalized because no language has been released, would require packers within a region of the country to purchase a government-mandated minimum number of cattle through negotiated or cash transactions. It would also establish a cattle contract library and loosen confidentiality requirements for USDA’s publication of data.

    No economic analysis of the bill’s effects has been offered to support the legislation.

    “If this bill becomes law,” said Potts, “there will be cattle producers who want alternative marketing arrangements, but will instead be forced to sell on the cash market, and the industry will turn back time to the days of commodity cattle.”

    The Bill Ignores Economic Analysis of the Beef and Cattle Market’s Behavior

    According to one independent analysis using USDA data, since August, prices for producers have been well above the five-year average and above prices in 2020.

    Last month, Texas A&M University published a book called “ The U.S. Beef Supply Chain: Issues and Challenges, ” a collaboration with Texas A&M’s Agricultural and Food Policy Center, national experts, and the U.S. Department of Agriculture.

    In the book the nation’s leading agricultural economists warned members of Congress against mandated minimums on negotiated or cash transactions because it will cost producers in in the form of lower prices: “While some argue that imposing mandatory minimums on negotiated (or cash) transactions would improve price discovery in the fed cattle markets – accruing benefits to the cow/calf producer in the process – authors in this book argue it could have the opposite effect, potentially imposing huge costs that are passed down to cattle producers in the form of lower prices.” (Page xi)

    The Bill Ignores Expert Testimony before House and Senate Agriculture Committees

    In testimony before the United States Senate Committee on Agriculture, Nutrition, & Forestry Hearing, “Examining Markets, Transparency, and Prices from Cattle Producer to Consumer,” Mark Gardiner, President Gardiner Angus Ranch said this, “Finally, it is my desire to indicate to this group as strongly as I possibly can, please do not create regulations and legislation that have the unintended consequence of harming value-based marketing. Doing so would undo many years of progress for producers such as my family and those of our customers. Onerous legislation has the potential to result in a reversal of quality that is simply unacceptable to consumers. Legislation limiting progress (and ultimately is a detriment to quality beef production) punishes America’s beef producers.”

    “Even if 100 percent of cattle were being sold on the cash market, it doesn’t mean prices would have been any higher than what we recently observed.” Dr. Jayson Lusk, Distinguished Professor and Head of the Department of Agricultural Economics, Purdue University, West Lafayette testifying before the House Agriculture Committee Subcommittee on Livestock and Foreign Agriculture.

    “Stated directly – without contemporary use of Alternative Marketing Agreements (AMA’s) I believe cattle prices would be lower as production efforts would not align as well with consumer demands.” Glynn T. Tonsor Professor, Dept. of Agricultural Economics Kansas State University testimony before the United States Senate Committee on Agriculture, Nutrition, & Forestry Hearing, “Examining Markets, Transparency, and Prices from Cattle Producer to Consumer.”

     “After three Congressional hearings featuring the testimony of industry experts and a major economic analysis of the beef supply chain out of Texas A&M, Senators continue to ignore market fundamentals and are attempting to guarantee higher prices for livestock producers,” said Potts. “The industry has resisted allowing the government to pick winners and losers in the past and all sectors of the beef supply chain: cow-calf producers, feeders and packers have benefitted.”

    For more information from the Meat Institute on beef and cattle markets see:

    New Texas A&M Report: Government Interference in Beef & Cattle Markets has Unintended Consequences; Will Cost Producers Billions

    They Said It: Economists, Academics, Industry Agree: Supply, Demand, Labor, Economies of Scale Drive Beef and Cattle Markets

    On Inflation: North American Meat Institute to Secretary Vilsack: Scapegoating Industry Does Not Help Consumer

    On Market Structure and Capacity: Meat Institute’s Public Comments in Response to Secretary Vilsack’s Request for Information on Investments and Opportunities for Meat and Poultry Processing Infrastructure

    NAMI Testimony House Livestock Subcommittee Hearing

  • Beef & Cattle Markets Driven by Supply & Demand

    Following warnings about government intervention in beef and cattle markets from leading agricultural economists from around the country, François Léger, Owner and CEO of FPL Food, on behalf of the North American Meat Institute (Meat Institute) offered his perspective on the market as a beef packer and processor during the House Agriculture Committee’s hearing to “Review the State of the Livestock Industry.”

    “The cattle and beef industry are driven by the supply and demand fundamentals of the free market, and the cattle industry is cyclical,” Léger said. “Not that long ago the cattle market was the reverse of today – in 2013, 2014 and 2015, the herd was small, and producers were making record profits while packers were losing money.

    “During the pandemic, with packing capacity operationally reduced and the cattle herd large, cattle prices dropped. FPL worked with the Georgia Cattlemen’s Association to help support the cattle industry: we need cattle producers. And cattle producers need packers.”

    For Léger’s complete written testimony go here.

    During the hearing, House Agriculture Chairman David Scott (D-Ga.) submitted for the record an analysis of beef and cattle markets originally requested by the Chair and Ranking Member of the Committee during the previous Congress. The analysis is a 180 page book called “The U.S. Beef Supply Chain: Issues and Challenges,” and is the result of a collaboration with Texas A&M’s Agricultural and Food Policy Center, national experts and the U.S. Department of Agriculture.

    One of the most significant findings of the report was that U.S. Senator Charles Grassley’s (R-Iowa) proposal to have the government mandate for a minimum of negotiated cash market purchases, called the 50/14 bill, would cost cattle producers $16 billion over 10 years.

    “Senators Grassley and Fischer’s proposed legislation will reduce the use of alternative marketing arrangements, hurting producers by limiting the ways in which they can market cattle, and damaging the entire industry by reducing the economic incentives to meet consumer demand for beef,” said Julie Anna Potts, President and CEO of the Meat Institute. “But this pales in comparison to the unintended consequences: an estimated $16 billion negative impact over 10 years, which will largely be borne by cattle producers. In a rush to pick winners in the beef and cattle market, Members of Congress may harm those they are trying to protect.”

    François Léger’s FPL Food employs 1300 workers and slaughters cull cows and bulls, sourcing cattle through auction barn purchases across the Southeast from more than a dozen states, from east Texas to the Carolinas, from Mississippi, Alabama, Louisiana, Virginia to Florida, and Georgia. FPL’s fed cattle operation, Chatel Farms has a herd totaling more than 8,000 head including Angus and Akaushi (Wagyu), pure-bred seed-stock animals, and feeder cattle to support the FPL Food beef brands.

    Léger told the Committee that production in meat packing and processing plants is tied to the number of employees working the line, and the pandemic has only exacerbated labor shortages.

    “Currently, we see on average 20 percent daily absenteeism in our plant,” Léger said. “I come to work every day and the first decision I face is which line to run and how to staff it. We have increased our starting salary to $15 an hour, which also means we must increase all salaries up the chain. Our average salary is now $20 an hour for plant workers, and yet we still cannot run at full capacity because of absenteeism. Our costs in salary alone have increased by $7 million a year.”

    Léger concluded his remarks with a warning of his own, “We cannot achieve these goals in a restricted market that does not allow companies like mine to produce products that meet consumer expectations. USDA has announced plans to propose new Packers and Stockyards Act rules to regulate the interactions between packers and producers, and bills have been introduced in Congress that would place certain purchasing requirements on packers. Government intervention could jeopardize packers’ ability to provide products customers and consumers desire. The industry needs to be customer oriented; we must provide the products customers want. Thirty years ago, I saw first-hand in France the result of direct government intervention into the meat industry, and it was a failure. I hope we avoid the same mistake here.”

    Léger’s testimony also reminded the Committee that the Meat Institute recently unveiled the Protein PACT for the People, Animals, and Climate of Tomorrow, the first joint initiative of its kind designed to verify progress toward global sustainable development goals across all animal protein sectors to ensure customers and consumers trust that meat aligns with their sustainability expectations.

    “Through the Protein PACT, Meat Institute members have developed robust metrics for continuous improvement and publicly committed to sustain healthy animals, thriving workers and communities, safe food, balanced diets, and the environment, and align with the United Nations’ 2030 Sustainable Development Goals,” Léger said.

    For more information from the Meat Institute on beef and cattle markets see the following:

    They Said It: Economists, Academics, Industry Agree: Supply, Demand, Labor, Economies of Scale Drive Beef and Cattle Markets

    On Inflation: North American Meat Institute to Secretary Vilsack: Scapegoating Industry Does Not Help Consumer

    On Market Structure and Capacity: Meat Institute’s Public Comments in Response to Secretary Vilsack’s Request for Information on Investments and Opportunities for Meat and Poultry Processing Infrastructure

  • Government Interference in Beef & Cattle Markets has Unintended Consequences

    In response to a bipartisan request from the House Agriculture Committee, Texas A&M University has completed a comprehensive report on the U.S. cattle and beef markets written by leading economists across the country. Among its key findings is that proposals increasing government intervention and mandates will cost livestock producers billions of dollars.

    “Thursday the House Agriculture Committee will hold the fourth Congressional hearing this year on beef and cattle markets. It is no surprise that the Texas A&M analysis reflects the expert testimony at each hearing: supply and demand have the most influence on the price of cattle and goods for consumers,” said Meat Institute President and CEO, Julie Anna Potts.

    The analysis is a 180 page book called “The U.S. Beef Supply Chain: Issues and Challenges,” and is the result of a collaboration with Texas A&M’s Agricultural and Food Policy Center, national experts and the U.S. Department of Agriculture.

    “The Texas A&M book went one step further and examined current legislative proposals and found these proposals’ unintended consequences will harm those they are meant to protect: cattle producers,” Potts said. “This book should be required reading for Members of Congress who want to help livestock producers and consumers.”

    One of the most significant findings was regarding government mandates included in proposed legislation by Members of Congress (called the 50/14 or 30/14 proposals) to require minimum negotiated cash market purchases. Dr. Stephen R. Koontz, Professor in the Department of Agricultural and Resource Economics at Colorado State University found:

    “The short-term impact for a policy most like that being considered is a $2.5 billion negative impact in the first year and a cumulative negative impact of $16 billion over 10 years, inflated to 2021 dollars. This cost is leveled mainly on cattle producers,” said Koontz. “The 50/14 proposal would have these negative impacts and the 30/14 would have similar negative impacts albeit approximately halved.” (Page 104)

    Similar to the experts and economists who have testified before Congress, the book’s introduction contains this warning:

    “In the meantime, we would urge extreme caution in making changes to a system that has grown organically over time to reward high-quality beef production in a way that acknowledges regional differences throughout the country.” (emphasis added) Page ix

    The book contains the following critical arguments:

    Regarding Concentration
    “While not necessarily a popular position, most economic research confirms that the benefits to cattle producers due to economies of size in packing largely offset the costs associated with any market power exerted by packers. Research indicates that there is market power, but its effect has been small.” Page x

    Fed Cattle Pricing:
    “Innovation via AMAs (alternative marketing arrangements) originated with feeders who were attempting to capture value associated with improved quality. There has been tremendous variability in the adoption of AMAs, with the Texas-Oklahoma-New Mexico region by far being the largest users of AMAs.” Page x

    “Reliance on formula pricing significantly reduced transaction costs associated with negotiation and induced predictability in the supply chain.” Page x

    Regarding Price Discovery:
    “Among the cattle market economists consulted, there was general agreement that price discovery in fed cattle markets is still robust despite the fact that less than 30% of the transactions are negotiated (or cash).” Page x

    In Chapter 2 of the Study, John D. Anderson, Professor and Head of the Department of Agricultural Economics and Agribusiness at the University of Arkansas, Andrew M. McKenzie, Professor and Associate Director of the Fryar Price Risk Management Center of Excellence in the Department of Agricultural Economics and Agribusiness at the University of Arkansas, and James L. Mitchell, Assistant Professor in the Department of Agricultural Economics and Agribusiness at the University of Arkansas and an Extension Livestock Economist with the University of Arkansas System Division of Agriculture wrote: “The reliance of formula prices on negotiated prices is reason enough to pay particular attention to the manner in which prices are established in the market. Negotiated prices not only reveal information about supply and demand fundamentals in the fed cattle market; they also contribute substantially to formula prices that control two-thirds or more of fed cattle trades. For both of these reasons, negotiated trades in the fed cattle market have some characteristics of a public good; therefore, market participants have a strong interest in ensuring that negotiated trades occur in sufficient quantity to fulfill this public good role (Koontz and Purcell, 1997).  Theory and empirical work, as reviewed in this volume, suggest that the figure may be quite small – smaller than market participants (at least on the selling side) are apparently comfortable with.” Page 61

    Requiring Minimum Cash Transactions:
    “While some argue that imposing mandatory minimums on negotiated (or cash) transactions would improve price discovery in the fed cattle markets – accruing benefits to the cow/calf producer in the process – authors in this book argue it could have the opposite effect, potentially imposing huge costs that are passed down to cattle producers in the form of lower prices.” Page xi

    Regarding Capacity
    “The experts consulted in this study repeatedly stressed the cyclical nature of the cattle business. While cattle supplies have outpaced available packing capacity, that will not always be the case. As a result, anyone who decides to build additional capacity must understand those market dynamics and be aware that packer margins can plummet with that cycle. The decline in packing capacity has occurred over several decades; it is not just a recent event.” Page xi

    For more information from the Meat Institute on beef and cattle markets see the following:

    They Said It: Economists, Academics, Industry Agree: Supply, Demand, Labor, Economies of Scale Drive Beef and Cattle Markets

    On Inflation: North American Meat Institute to Secretary Vilsack: Scapegoating Industry Does Not Help Consumer

    On Market Structure and Capacity: Meat Institute’s Public Comments in Response to Secretary Vilsack’s Request for Information on Investments and Opportunities for Meat and Poultry Processing Infrastructure

    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.

  • Experts Agree: Livestock Markets Not Broken; Affected by Supply & Demand

    With cattle futures reaching new multi-year highs this week, The North American Meat Institute today submitted testimony to the Senate Judiciary Committee underscoring the supply and demand fundamentals of beef and livestock markets and opposing further government intervention that will result in unintended consequences.

    “Industry experts, market participants and economists testifying before three different congressional committees in the past two months have found that beef and cattle markets have behaved predictably given supply and demand pressures,” said Julie Anna Potts, President and CEO of the North American Meat Institute. “These witnesses join the Meat Institute in maintaining the beef and cattle markets are dynamic, with recent challenges being due to labor shortages and the COVID pandemic rather than market structure.”

    The Meat Institute submitted written testimony to the Senate Judiciary Committee’s hearing called, “Beefing up Competition: Examining America’s Food Supply Chain.” Senate testimony may be found here.

    In addition to debunking claims about market concentration, the testimony includes important new analysis which shows that the beef market is rebounding:

    “Beef demand remains high: the total volume of beef sales in 2021 from January through mid-June remained more than 4 percent higher than the pre-pandemic levels over the same period in 2019. This increase in beef demand in 2020 happened while the packing sector’s ability to process cattle was experiencing operational constraints, and has continued into this year while labor availability has similarly affected the packing industry’s ability to operate at full capacity. Meanwhile, the supply of fed cattle remained large. In short, COVID-19 created a significant “kink in the chain” that took time to straighten.

    “Early in the pandemic the National Cattlemen’s Beef Association (NCBA) commissioned the Oklahoma Cooperative Extension Service and several distinguished agricultural economists to examine the impact COVID-19 was having and was expected to have on the beef cattle industry. That paper warned ‘the timeline for market recovery from COVID-19 is unknown, and cow-calf losses could expand into 2021 when the summer and fall 2020 calf crops would be marketed.’

    “The market is rebounding. This week Feeder Cattle futures reached contract highs for the August through March 2022 contracts. On Monday, July 26, the Feeder Cattle contract closed at its highest since March 2016. Live Cattle futures prices so far in July have averaged higher than the same month in 2017, 2018, and 2019, all pre-pandemic. This reflects a smaller supply of cattle, which according to USDA’s mid-year cattle inventory report released last week, is down 1 percent from last year. Also, it reflects the recovery in cattle processing capacity.”

    In the testimony, the Meat Institute also offers a primer on market fundamentals at all stages of production:

    “From ranch to the slaughter plant rail, live cattle typically change ownership two to three times. Cow-calf producers market their cattle to feeders, or to backgrounders who in turn move those cattle to feeders, who then market to packers. The price for cattle at any of those three most common points of transactions is a function of how many cattle are in each respective market segment. In other words, the price is determined by supply of cattle to sell from one segment and the demand for buying cattle by the next segment. That explains why each segment can experience different margins and why there is a futures contract for two types of cattle: feeder cattle and fed cattle. When any of those segments are out of balance, prices move, and the moves can be dramatic, as witnessed by the COVID-spurred retail beef demand, which represents the final segment of the entire pasture to plate value chain, and the COVID-imposed imbalance within various segments of the cattle sector.”

    In response to calls for more “transparency,” The Meat Institute’s testimony provides more information about mandatory price reporting and other requirements for packers to be transparent with industry data:

    “There is robust price discovery in the cattle and beef markets. Congress established and USDA administers the Livestock Mandatory Reporting Act (LMR) program to facilitate open, transparent price discovery and provide all market participants, both large and small, with comparable levels of market information for slaughter cattle and beef, as well as other species.

    “Under LMR, packers must report to AMS daily the prices they pay to procure cattle, as well as other information, including slaughter data for cattle harvested during a specified time period and with net prices, actual weights, dressing percentages, percent of beef grading Choice, and price ranges, and then AMS publishes the anonymized data.

    “AMS publishes 24 daily and 20 weekly cattle reports each week. Weekly reports start Monday afternoon and end the next Monday morning. These reports cover time periods, regions, and activities and the data include actual cattle prices.

    “Further, packers report all original sale beef transactions in both volume and price through the Daily Boxed Beef Report. This data is reported twice daily, at 11:00 a.m. and at 3:00 p.m. Central Time. The morning report covers market activity since 1:30 p.m. of the prior business day until 9:30 a.m. of the current business day. The afternoon report is cumulative, including all market activity in the morning plus all additional transactions between 9:30 a.m. and 1:30 p.m., and is on the USDA DataMart website. The boxed beef report covers both individual beef item sales and beef cutout values and current volumes, both of which are derived from the individual beef item sales data.

    “Stepping back for a moment, it is unimaginable in virtually any other industry participants in a free market would be required to report such data on an on-going, daily basis, and that the data would then be published by the government for competitors and other market participants to view, analyze, and use as a basis for strategic decisions. And yet, despite all of the onerous, mandated reporting requirements already in place, some people claim there is no market transparency and there needs to be more price discovery. Where does it end?”

    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.