Football season has begun. Tailgating is part of the fun. But the hamburger on the grill this weekend – odds are you bought it at the local grocer, but the cattle it came from was born and raised in Australia, Brazil, Mexico. Anywhere but here.
At least some Senators are aware of this and are trying to buck the World Trade Organization by calling for beef to be included in country-of-origin labeling rules. As it stands, processed in the U.S., or inspected by the USDA, doesn’t mean it came from an American cattle ranch.
On September 8, Senators John Thune (R-S.D.), Jon Tester (D-Mont.), Mike Rounds, (R-SD), and Cory Booker (D-N.J.) announced they will introduce a bill on Monday to reestablish mandatory country-of-origin labeling (COOL) for beef. The legislation will reinsert “beef” and “ground beef” into the current country-or-origin law that requires origin labeling on many food commodities, including that other popular grilled meat: chicken.
Washington has tried this before. But Canada and Mexico argued that it was discriminatory. The WTO agreed. And at the time, a WTO-friendly government backed down. While this current Administration surely is no WTO disruptor, the fact that a bipartisan group of Senators thinks labeling is an issue could finally push this topic to a resolution.
If mandatory COOL for beef has not already been implemented by the USTR and the Secretary of Agriculture one-year after enactment of any passed legislation, then the mandatory labeling would go into effect on that one-year anniversary.
The Senate bill is needed to restore competition to the nation’s broken cattle and beef markets marked by inflated beef prices paid by consumers and depressed cattle prices paid to U.S. cattle producers as the big four meatpackers, led by Brazilian multinational JBS in Colorado, keep beef prices low due to imports, but sell to consumers high declaring issues with U.S. supply.
CPA believes that a mandatory COOL for beef will help American ranchers compete in their own domestic market – giving food-savvy consumers a chance to choose supporting local, American ranchers, as opposed to imports that help the profit margins of the big four multinational meatpackers. Many American ranchers have complained that foreign beef is replacing the share of locally raised cattle.
On this issue, it is worth noting that something as basic as your local grocer’s hamburger patties is now garnering the attention of the White House. Earlier this week, National Economic Council director Brian Deese was ridiculed in the press for saying that food inflation was near its historic norms if not for rising beef prices.
Meat constitutes half of the price increases in food consumed at home. Large price increases for beef, pork, and poultry are driving the recent price increases consumers are seeing at the grocery store (a measure commonly known as “food at home”). Together, these three items account for a full half of the price increase for food at home since December 2020. Since that time, prices for beef have risen by 14%, pork by 12.1%, and poultry by 6.6%.
Deese issued a briefing on this on Wednesday, the same day Sens. Thune, Tester, Rounds, and Booker, said they will try tackling the import labeling issue with a mandatory COOL Act next week. By turning the beef market into a global beef market, like everything else, the big monopolistic players can pit American ranchers, with their much stronger currency, against Canadian and Mexican ones, with weaker currencies.
The meat-processors are generating record profits during the pandemic, at the expense of consumers, farmers, and ranchers. The dynamic of a hyper-consolidated pinch point in the supply chain raises real questions about pandemic profiteering. During the pandemic, wholesale prices for beef rose much faster than input prices for cattle. That means that the prices the processors pay to ranchers aren’t increasing, but the prices collected by processors from retailers are going up. – Brian Deese, others, White House, Sept. 8, 2021.
The White House is now recognizing the impact the beef monopoly has on pricing and, therefore, on local inflation dynamics, let alone the livelihood of American ranchers. The crisis began years before the pandemic, actually.
In 2019, R-CALF USA, a group representing domestic cattle ranchers, filed a class-action antitrust lawsuit against four meatpackers, alleging that since at least the beginning of 2015 they have been in violation of U.S. antitrust laws by conspiring to depress the price of cattle they purchased from American ranchers through massive import competition.
They allege, and the White House seems to agree, that the big multinational meatpackers – JBS, Tyson, Cargill and National Beef (whose majority shareholder is another Brazilian giant called Marfrig) – all reduced their purchases of American cattle, colluded to reduce price competition amongst themselves, and transported cattle over uneconomical distances including Canada, in order to depress U.S. prices. They also closed some meatpacking plants to ensure the underutilization of domestic beef packing capacity, in favor of cheaper imports, especially from the top three: Canada, Australia, and New Zealand.
Ohio State University estimates that at least 90% of our imported beef is inexpensive lean trim that is blended and processed with domestic beef fat originating from domestic cattle. That goes into fast-food hamburgers. The industry argues that without the imported ground beef, the fat from domestic beef used for prime cuts like filet mignon would have little value and would lower the prices paid to local cattle ranchers even more.
But local ranchers aren’t buying that argument.
It’s not just McDonald’s quality ground beef that is imported. Our largest importer is Canada. They sell similar beef, including organic, grass-fed beef sirloins and even live cattle. Some 300 thousand of them were sold here so far in 2021, according to industry data.
Moreover, every American ranch also sells the kind of lean beef used for hamburger patties, and those prices have been severely depressed thanks to imports from Australia and New Zealand. A little more than half of the beef that is imported is for ground beef patties. But the rest is prime cuts – from filet mignon to sirloins.
The packers argue that there is a shortage of supply in the U.S. and strong demand, which makes imports necessary. The import market means millions of more heads to choose from, which increases supply and depresses prices. Despite closing some facilities over the years, companies like JBS have not had a hard time finding space to process live cattle from Canadian ranches. American ranchers are looking for some support in Washington, and while country-of-origin labeling won’t impact pricing, it will give consumers visibility on where their food is coming from. If it’s from McDonald’s, odds are it’s not American beef. If it’s on your grill in the parking lot of Notre Dame on Saturday, or at Gillette Stadium in Foxboro, Massachusetts on Sunday, odds are only a little bit better at this point.
From the White House briefing on Wednesday:
These record profits, income, and margins underscore the role that meat processors dominant market position and power play in increasing meat prices. While factors like consumer demand and input costs are affecting the market, it is the lack of competition that enables meat processors to hike prices for meat while increasing their own profitability. That is, if they faced meaningful competition, the processors would simply be able to extract fewer profits if their costs had gone up unexpectedly while keeping prices lower to earn retailers’ business.
Some of these companies have also been rewarding their shareholders with large dividends and buybacks during this period. For instance, the large processor JBS provided $2.3 billion in dividends and share buybacks in 2020. It has proposed record high dividend payments for 2021, increasing payouts to shareholders by nearly 75% over 2020. Similarly, Tyson recently raised dividends by 6% for fiscal year 2021, spending $477 million on dividends in the nine months ending July 2021. It also repurchased $200 million of shares between September 2020 and July 2021.