President Biden has found a scapegoat for rising inflation: the meat industry. Mr Biden claimed last week that meat packers, which process, package and distribute the meat raised by farmers and ranchers, are driving up prices, causing soaring prices. consumer prices for beef, chicken and pork. As they say in cowboy country, Mr. Biden’s claim is a hat and not cattle. Unable or unwilling to recognize the problems that really drive inflation, Mr. Biden offers solutions based on the same failed policies that got us into this inflationary mess in the first place.
Meat prices are skyrocketing because the meat industry, like virtually every other industry, faces significantly higher input and labor costs. It’s not a secret. Start with feed costs, which are at historic levels. As the Journal reported on December 27, feed costs have skyrocketed in 2021 and are expected to be volatile this year. This makes it more expensive to keep cattle, which in turn leads to higher costs for meat.
Feed costs are higher in part because fertilizer costs are higher. Data from the American Farm Bureau Federation shows the costs of anhydrous ammonia, used in nitrogen fertilizers, increased by 210% in September 2021 compared to a year earlier.
Fuel costs have skyrocketed, along with gasoline prices up 58% in November compared to the previous year, according to the Bureau of Labor Statistics. This increases the cost of transporting livestock to processing plants and finished products from processing plants to your local grocery store.
Labor costs are also higher, much higher. The Washington Post reports that meat processors have been paying a starting wage of $ 14.50 an hour before the pandemic, a figure that rose to $ 22. Tyson Foods recently announced that it spent $ 500 million last year on salary increases and bonuses, including $ 50 million in employee bonuses. But with 10.6 million job vacancies in November, only 6.8 million people unemployed and 4.5 million people left their jobs, meat processors, like most businesses, have struggled to find and retain workers despite significant wage increases. This labor shortage is creating bottlenecks.
With increasing demand for meat around the world, higher costs and labor-induced supply shortages are obviously leading to dramatic price increases. Supply and demand is not difficult to understand. But common sense goes out the window when politicians play the blame game.
Mr Biden wants to increase federal oversight of meat packers on antitrust grounds in order to bring prices down. Four packers account for around 80% of beef processing, 70% of pork processing and just over half of poultry processing. But the âbig fourâ companies identified by the president compete with each other, much like large companies in other industries. About half of the chicken market is controlled by competitive regional companies, not the big guys. However, prices are rising. Mr. Biden’s assertion that “capitalism is not capitalism without competition” rings hollow when there really is competition.
In reality, the competitive field of meat packaging is essentially the same as it was before the pandemic. Meat prices have increased due to soaring costs and labor shortages, not a lack of competition. Recognizing and solving these problems could actually help reduce inflation.
Instead, Biden is aiming for the standard playbook of large governments – increased federal regulation and spending. The White House issued a statement pledging to issue “new, stricter rules under the Packers and Stockyards Act” targeting meat packers. The Ministry of Justice and the Ministry of Agriculture will also step up their monitoring.
Does anyone outside the White House think that increasing regulatory burdens on meat packers will lower meat prices?
As for increased government spending, Biden has pledged to spend $ 1 billion to subsidize small processing plants to increase competition. Helping small businesses is certainly a worthy goal. But, government gifts offer short-term help at best. A more effective approach would be to reduce, rather than increase, regulatory costs that put small processors at a competitive disadvantage. Large companies are better able to absorb these costs.
Several Republican congressmen from agricultural states have introduced bills to deregulate sales of state-inspected meat, which, provided they do not reduce food security, are worth supporting. The US Department of Agriculture, in conjunction with the Occupational Safety and Health Administration, recently announced regulatory changes for a pilot program designed to increase line speeds at pork processing plants, which could reduce costs if it were adopted on a large scale.
Inflation is a growing problem that requires effective solutions. Mr. Biden’s plan to ignore the underlying causes and scapegoat others is not a solution. In the absence of a policy change, voters in November may well be asking: where’s the beef?
Mr. Puzder is a former CEO of CKE Restaurants, President of 2ndVote Value Investments Inc. and Senior Fellow of the America First Policy Institute. Mr. Coggin is Managing Director of the Center for Consumer Freedom.
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