Currently browsing posts about: Food-industry

Four items about the Big Four meat companies that collectively control 85% of the beef market.

I.  Reuters reports that JBS, the Brazilian meat giant, has settled claims that it engaged in price fixing for—gasp—$52.5 million.

JBS, its U.S. affiliates, and the other three of the Big Meat companies—Cargill Inc, National Beef Packing Co and Tyson Foods—have been accused of conspiring to limit supply iin order to raise prices and boost profits.

In a statement, JBS said it did not admit liability but that settling was in its best interest. It also said it will defend against beef price-fixing claims by other plaintiffs.

The settlement still requires approval from the courts.

JBS settled one month after U.S. President Joe Biden announced a plan here for new rules to bolster competition and stop “exploitation” in the meat sector.

Comment: I’ve written about the President’s executive order on the meat industry here, his challenge to consolidation here, and his concern about lack of competition here.  $52.5 million sure looks like guilty as charged, no matter what JBS says.

II.  The National Cattlemen’s Beef Association issued a statement on the settlement.

The announcement that JBS USA has decided on a $52.5 million settlement over allegations of beef price fixing is deeply disturbing to the National Cattlemen’s Beef Association (NCBA). NCBA was the first national organization to request a government investigation of beef markets in 2019. Now there are settlements occurring without Department of Justice (DOJ) having released findings or even providing cattle producers with an update on progress.

Comment: The NCBS is disturbed?  I’ll bet.

III.  The American Enterprise Institute has released three articles on food price inflation, meat prices and pork prices.

• AEI – Food price spikes temporary, inflation likely to fall in 2022
• Where’s the pork in the surge in recent pork prices?  Maybe nowhere, and not in the meatpacking industry 
• Subsidized beef packing expansion unlikely sustainable

IV.  Tyson Foods, one of the other defendents in the price-fixing case, is #1 on Fortune’s World’s most admired companies list for food producction, and for the sixth straight year, no less.

Comment: You can’t make this stuff up.

Paco Underhill.  How We Eat: The Brave New World of Food and Drink.  Simon & Schuster, 2022.

What to say about this book.

For one thing, Underhill is a supermarket consultant, whose job it is to tell supermarkets how to sell more food.

For another (full disclosure), chapter nine is titled “Shopping with Marion,” and that would be me.

I met Underhill and his collaborator, Bill Tonelli, at the amazing Sunrise Asian supermarket upstairs from the corner of 9^th Street and 3^rd Avenue in Manhattan.  We wandered around the store for a bit, collected another shopper, and went out for coffee.  The result is presented largely in the form of a conversation.  Here’s a sample from page 157 that starts with Underhill explaining why he loves visiting Hollywood (he lives in New York):

“…And going to L.A. is so refreshing.  Partially because I got sick of eating here—I live by eating according to the season, and it’s so easy to do in L.A., but back here I’m like, cabbage and apples and potatoes, again?”

“Carrots,” Marion says.

“Carrots.  ‘Oh look, we have rutabaga.  Yay!’  So yeah, I’m a jerk.  I’m one of those people who want to be completely seasonal and local but can’t hack it everywhere.”

“Ithaca has a rutabaga roll every year just before Christmas,” Marion says.  “It’s a bowling contest at the farmers market.  You bowl with rutabagas.”

This is a chatty book with lots of Underhill’s insights into how supermarkets work, starting with parking lots, and what he thinks stores ought to do to face the retail future.

He also went to farmers’ markets, this time with Nina (Planck) Kaufelt.  That chapter is titled “The citified get countrified (and vice versa.”

It’s a chattier and unreferenced version of my 2006 book, What to Eat—the one I am currently updating—but I did take some notes.

I enjoyed reading it, but I’m not exactly an unbiased critic.

I am on the mailing list for the North American Meat Institute (NAMI) the trade association for Big Beef, and I like knowing what it has to say.

Right now, it is in defensive mode.  The industry must be—and ought to be—concerned about White House interest in making the beef industry more competitive.

But wait, says NAMI, there’s nothing new here.  Four beef processors have held 80% of the market since 1994.

And, it says, the meat industry is not responsible for the inflationary cost of meat.

It also denies anti-trust allegations.

In testimony to the House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law on “reviving competition,” NAMI said the meat industry is not to blame:

The administration will be surprised to learn that economic fundamentals have led to inflation. Labor shortages. Transportation and supply chain challenges. Regulatory policies. And all of those input challenges were coupled with record meat demand.
Collectively, these factors drove up prices for wholesale and retail beef…The discussion above demonstrates that free market fundamentals drive the cattle and beef markets and that what we have seen before and during the course of the pandemic was to be expected.

The testimony, which is well worth reading, makes this case.  It does not discuss the behavior of the big four meat processors during the pandemic: forcing sick people to come to work, inducing the President to sign an executive order to keep plants open, squeezing ranchers so they can’t make a living, and demanding higher prices at the store.

NAMI may be right that consolidation in this industry happened a long time ago, but the pandemic revealed its exercise of power in a way that had not been previously so visible.

Let’s hope the Justice Department gets to work on this.

To continue the thene of yesterday’s post, check out this report from the Global Health Advocacy Incubator (an international organization that supports advocacy).

The report documents the food industry’s strategies to defeat warning labels on ultra-processed food products (UPP).

1. Protect the UPP industry’s reputation and brands through corporate washing;
2. Influence policies through multilateral bodies to delay implementation and threaten countries with legal and economic concerns;
3. Divert attention from its corporate responsibility on the damage to environmental and human health to blame individuals for their behaviors;
4. Imply that their products contribute to health, the environment, and society while blocking the development and implementation of healthy food policies; and
5. Seek loopholes in regulations to continue promoting ultraprocessed products.

For example, here is how strategy #5 was implemented in Mexico:

Here, also for example, is image #27:

What should civil society organizations be doing to counter industry tactics?

• Monitor and unmask industry practices
• Use legal strategies
• Avoid loopholes, gaps, and ambiguities when developing labeling  policies
• Demand transparency and no conflicts of interest

This report is exceptionally well documented, covers an enormous range of countries, and gives a quick but compelling overview of how the food industry operates internationally to product product sales.

• Full report click here.
• Executive Summary
• Report’s microsite:  advocacy examples recommendetions.
• Webinar: English, Spanish, Portuguese

I was amazed to see this announcement from the White House, of all places: “Recent Data Show Dominant Meat Processing Companies Are Taking Advantage of Market Power to Raise Prices and Grow Profit Margins.”

In September, we explained that meat prices are the biggest contributor to the rising cost of groceries, in part because just a few large corporations dominate meat processing. The November Consumer Price Index data released this morning demonstrates that meat prices are still the single largest contributor to the rising cost of food people consume at home. Beef, pork, and poultry price increases make up a quarter of the overall increase in food-at-home prices last month.

The big concern is consolidation—monopoly power—in the meat industry.

Four large conglomerates control approximately 55-85% of the market for pork, beef, and poultry, and these middlemen were using their market power to increase prices and underpay farmers, while taking more and more for themselves…their gross profits have collectively increased by more than 120% since before the pandemic, and their net income has surged by 500%. They have also recently announced over a billion dollars in new dividends and stock buybacks, on top of the more than $3 billion they paid out to shareholders since the pandemic began.

The bottom line?

The meat price increases we are seeing are not just the natural consequences of supply and demand in a free market—they are also the result of corporate decisions to take advantage of their market power in an uncompetitive market, to the detriment of consumers, farmers and ranchers, and our economy [bold face in original].

Will the Biden Administration be able to do anything about this level of monopoly power?  Stay tuned.

Benjamin Lorr.  The Secret Life of Groceries: the Dark Miracle of the American supermarket.  Avery/Penguin Random House, 2020.

I don’t know how I missed this one when it came out in mid-2020, but I did.*

I saw a reference to it and thought I ought to take a look, largely because I am gearing up to update my book, What to Eat, in a second edition for Picador/Farrar Straus Giroux.

My book, which first appeared in 2006, is about food issues, using supermarkets as an organizing device.

Lorr’s book, which I expected to be a superficial expose of supermarkets, is anything but.

It is a deep, detailed, personal, and utterly powerful indictment of the human rights violations perpetrated on workers in grocery supply chains: truckers, grocery store clerks, Thai workers on shrimp-catching boats.

The personal comes in because Lorr is an experiential immersion journalist.  He embedded himself with a trucker, the fish section of a Whole Foods market, and a Thai fishing boat, as well as spending several years doing interviews.  Using the personal stories, he has plenty to say about truly shameless exploitation of low-wage workers in order to keep food costs low.

If you want to understand what low-wage work—or the Great Resignation—is about, here’s an excellent place to start.

This is an important book about food labor issues, but also about how more general systems of exploitation are maintained.

The “more general” leads me to pick one bone with Lorr’s analysis.

For those of us, he says:

Who want to shake the world aware to the fact that we are literally sustaining ourselves on misery, who want to reform, I very much don’t want to dissuade you so much as I want you to consider that any solution with come from outside our food system, so far outside it that thinking about food is only a distraction from the real work to be done.

His book, I’d say, proves just the opposite.  Food is his entry point into this topic and would not be there without it.

*I shouldn’t have missed it.  It was reviewed in the New York Times.  And Charles Platkin, whose work I follow closely, interviewed Lorr when the book first came out.

Xavier Naville.  The Lettuce Diaries: How a Frenchman Found Gold Growing Vegetables in China.  Earnshaw Books, 2021. 

The publicist for this quirky book sent it to me and I have to admit being charmed by it.  The French author started out in international corporate food, managing canteens in 70 countries for the Compass Group and based in Paris.

At age 27, almost on a whim, he went to Shanghai to sell salads to the Chinese (who didn’t eat salads) and oversee the production of vegetables for KFC and other fast food places.

He was, to say the least, ignorant of Chinese language and culture but learned a lot during the twenty years or so he spent there.

His book is about how his naivete and uncertainty got in the way of getting small farmers to grow lettuce and other vegetables consistently and safely, and how he slowly and painfully learned to speak and write Chinese, and learn the importance of guanxi (personal relationships essential for getting anything done in China).

He is so modest, so hard on himself, and so likable that I wanted him to succeed—which he did, and quite well.

Among other things, his company produced bagged salads for Chinese supermarkets.  Food safety maven that I am, I won’t even buy bagged salads in the U.S.  His descriptions of small-scale food production are terrifying.

He reports no outbreaks due to his products, although he talks about plenty of others, including the melamine-in-infant-formula scandal predicted by the earlier melamine-in-pet-food scandal I wrote about in Pet Food Politics.  

I liked his thoughtfulness about his experience.

All these years, I had viewed the microscopic farming plots as a barrier to the modernization of China’s agriculture.  But after a few hours with my Chinese friends, I was beginning to see things differently.  Where would all these seasonal foods come from if there were fewer farmers?  Would there still be regional differences?  If China follows the developmental path of the West, the number of farmers will shrink while operations increase in size.  Farms will focus on scale and productivity, specializing in fewer crops, breeding the most productive ones and neglecting some that have a higher nutritional content but lower returns per acre.  Is that really what Chinese consumers want?

…family farmers weren’t necessarily just an obstacle on China’s path toward modernization; they might actually be its cultural gatekeepers, protecting the local food industry and underpinning a renaissance of Chinese beliefs that will be key to the health of both the Chinese people and the safety of the foods they cherish.  (p. 246)

Quirky?  Definitely for a business book, but in a good way.  I enjoyed reading it.

[The author is now a food business consultant in Oakland, CA].

Two articles on similar themes have come out recently.

Is It Time to Break Up Big Ag? — The New Yorker

Nationally, the four largest dairy co-ops now control more than fifty per cent of the market. They’ve been able to grow so big, in part, because of a 1922 law called the Capper-Volstead Act, which provides significant exemptions from antitrust laws for farmer-owned agricultural coöperatives. “The agricultural industry is different than other industries because Capper-Volstead allows them to combine in ways that other individuals would go to jail for,” Allee A. Ramadhan, a former Justice Department antitrust attorney who led an investigation into the dairy industry, told me.

The law’s protections were intended to give small, independent farmers the right to collectively bargain prices for processing and selling their goods, but many large co-ops, such as D.F.A., have increasingly come to resemble corporations.

Break Up Big Chicken — The New York Times

Most chicken that Americans eat is processed by a handful of big companies because, in recent decades, the government gave its blessing to the consolidation of poultry processing, along with a wide range of other industries. The unsurprising result: In recent years, the surviving companies took advantage of their market power to prop up the price of chicken, overcharging Americans by as much as 30 percent.

Evidence of the industry’s misconduct became so blatant — thanks in part to lawsuits filed by wholesale poultry buyers — that regulators were roused from complacency. Beginning in 2019, the government has filed a series of charges against the companies and their executives.

And while we are at it, let’s not forget Philip Howard’s work, which I’ve written about previously.