Vilsack in Iowa: USDA will offer $655M to smaller meatpackers in bid to add competition

The federal government will spend $655 million on loans and grants to help launch new meat-processing facilities to help compete with four major corporations that control the market, U.S. Agriculture Secretary Tom Vilsack announced in Council Bluffs Friday.

Included is a $500 million program aimed at establishing new or expanded operations, said Vilsack, a former Iowa governor. The money will come from the American Rescue Plan pandemic relief bill.

“I think it sends a strong message to those who are currently in the business that they are not necessarily going to have that capacity, and that they need to be sensitive to the needs of producers,” Vilsack said. “It’s not in in their best interest, it’s not in the best interest of the nation, to seek future consolidations or to to drive people off the farm.

“We have to expand the processing in this country. We can no longer rely on four packers. We are breaking new ground today,” Vilsack added.

That announcement came the same day President Joe Biden signed an executive order requiring the U.S. Department of Agriculture, Vilsack’s agency, to write rules under the Packers and Stockyards Act to give farmers more of a say in the price they get for their livestock. 

“Four large meatpacking companies dominate over 80% of the beef market and, over the last five years, farmers’ share of the price of beef has dropped by more than a quarter — from 51.5% to 37.3% — while the price of beef has risen,” a White House fact sheet noted.  

U.S. Rep. Cindy Axne, D-3rd District, who appeared with Vilsack,  said she’s been hearing for years that the Big Four companies have too much power. 

The grants and loans will help turn the situation around, Axne said. “For many folks, this is exactly what they want to see,” she said.  “What this does is provide us with a lot of stability in a lot of areas.

“It’s going to create a more competitive market,” she added.

Vilsack said the grants and loans will help expand small- and medium-sized packing operations, and, over time, add new ones. “These things aren’t built overnight,” Vilsack noted. 

He also announced an additional $155 million for aid to existing small and medium-sized meat processing operations to help offset the costs of federal inspections and to promote expansions. 

Iowa’s congressional delegation has regularly heard from farmers angered that Tyson, National Beef, Cargill and JBS have too much control over prices and often make huge profits while livestock farmers struggle.

U.S. Sen. Chuck Grassley, R-Iowa, last month called for Congress to take action to address what he called an “unfair situation.” Grassley said packers sometimes make $800 to $1,200 per cow even in markets when farmers lose money on the same animal.

On Friday, Grassley praised both Biden and Vilsack for addressing the issue. “I’ve long been actively engaged in working to fix the anticompetitive practices in our farm economy and I’m glad the Biden administration is particularly beefing up enforcement and expanding transparency in the livestock markets,” Grassley said in a statement. “This builds on the work I’m doing with my colleagues in Congress to reform the cattle market through legislation and hearings.”

In Council Bluffs, Vilsack said nearly 90% of farm families have to rely on some nonfarm income to survive financially, and half of the farms are losing money.

Biden’s move to give farmers more power to negotiate livestock prices and to fix their own farm equipment drew quick opposition from meatpackers and praise from unions. 

Sarah Little, spokeswoman for the  North American Meat Institute, told Agri-Pulse, “The bottom-line is, the current level of four-firm concentration has existed for more than 25 years and it has not ensured packer profitability at the expense of producers. No sector — cow-calf, feedlot, nor packer — has realized positive margins every year.”

United Food and Commercial Workers International, which represents many meatpacking company employees, said the help is needed.

“Meatpacking workers have been among the hardest hit by COVID-19 and today’s action puts workers and consumers first by strengthening oversight of meatpacking monopolies that suppress wages and drive up food prices at the grocery store,” UFCW President Mark Perrone said in a statement. “With stronger country of origin labeling for food, this executive order supports American jobs and protects the right of consumers to know where their food is from, whether it’s safe, and if it’s produced by American workers.”

Biden sought to address one more issue.

Biden said some tractors are designed to lock up if they malfunction, forcing the farmer to wait for the manufacturer to do repairs. That can be costly and in some cases unnecessary, the president noted in his White House announcement. The executive order gives farmers the right to fix their own equipment or hire an independent mechanic.