USDA says more than $200M will help meat processors expand

By JOSH FUNK
AP Business Writer

OMAHA, Neb. (AP) — The Agriculture Department announced more than $223 million in grants and loans Wednesday to help small- and mid-sized meat processing plants expand as part of a larger $1 billion effort to boost competition in the highly concentrated industry.

The effort is expected to increase cattle and pig slaughter capacity by more than 500,000 head a year. It will also help poultry plants process nearly 34 million more birds, while adding more than 1,100 jobs mostly in rural areas where the plants are located.

The Biden administration wants to add meat processing capacity to give farmers and ranchers more options where they can sell the animals they raise. This while hopefully reducing prices for consumers by increasing competition, given that the biggest companies now have so much power over pricing in the “highly, highly concentrated and consolidated” business, Agriculture Secretary Tom Vilsack said.

In beef, the top four companies control 85% of the market, while the top four companies control 70% of the pork market. The four biggest poultry processors control 54% of that business.

“We’re looking forward to these projects taking hold and creating new opportunity and new choice for producers and consumers,” Vilsack said before touring a beef-processing plant in Omaha, Nebraska on Wednesday.

The USDA’s announcement, combined with Vilsack’s plant tour, comes as President Joe Biden is highlighting his achievements to voters before Tuesday’s midterm elections. Several of the administration’s recent announcements have targeted rural areas in states that generally support more Republicans than Democrats.

Vilsack said the Greater Omaha Packing company will use its grant to expand beef processing capacity roughly 30% to handle 700 head of cattle per day and add 275 more jobs. The Omaha company is one of the biggest of the 21 grant recipients nationwide that will share $73 million. Greater Omaha will receive a $20 million grant to help pay for a planned $100 million expansion of its plant.

Iowa farmer Dan Pedersen who feeds about 12,000 head of cattle a year on his farm near Underwood that he sells to Greater Omaha said the project will be welcome because it will bring more competition to the area.

“Any time you have more demand than supply, you’re going to win,” Pedersen said.

Some of the other grants will go to helping Pure Prairie reopen an idle poultry processing plant that will employ hundreds of people in Charles City, Iowa. And the Cutting Edge Meat Company in Leakesville, Mississippi, expects to be able to reduce its current six-month backlog for beef and pork processing by expanding its capacity.

The other $150 million of funding announced Wednesday will go to 12 loan programs that will help independent meat processors continue operating as they work to expand. And applications for additional grants and loans are being accepted now for another round of spending next year.

The big meat processors maintain that supply and demand factors — not industry concentration — drive prices for beef, pork and poultry products. And they say processing capacity has been restrained by the ongoing shortage of people to work at these plants, which are typically in rural areas with small populations.

The worker shortages were highlighted during the pandemic when a number of major meat processing plants had to shut down as the virus tore through them because so many workers became ill or had to quarantine. That contributed to shortages of meat in grocery stores that drove up prices.

The price paid for the animals that are slaughtered has long been a point of contention because even as meat prices soar with inflation and tight capacity in the industry, farmers and ranchers receive a relatively small share of the profits. Federal data show that for every dollar spent on food, the share that went to ranchers and farmers dropped from 35 cents in the 1970s to 14 cents recently.

Agricultural economists have said that smaller processing plants also might have a hard time competing with the major meat companies because they are far less efficient than the big plants run by companies like Tyson, Smithfield Foods, Cargill, JBS, and Purdue Farms.

In addition to these loans and grants, the White House has also adjusted administrative rules to make it easier for farmers and ranchers to report concerns or sue over anticompetitive behavior. Officials are also planning new rules to label meat as a U.S. product to differentiate it from meat raised in other countries.