Covid Almost Caused a Meat Crisis

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Last April, as the pandemic got underway, it was easy to laugh off the absurdity of toilet-paper shortages. But when supermarket meat cases emptied out at the end of the month, nobody was laughing. The shortages were the result of Covid outbreaks at a handful of companies responsible for most of the country’s meat supply. Briefly, the virus threatened to shatter a key link in America’s previously unbreakable food chain.

Last week, a Democratic House panel started a probe into who was ultimately responsible for those outbreaks. It’s a crucial question, but it’s not the only one that lawmakers should be asking about this episode. They should also look into why just a handful of companies now processes almost all of the meat purchased by American consumers.

To an extent few consumers appreciate, most of the U.S. meat supply emerges from a small number of facilities. By one estimate, about 50 large plants are responsible for slaughtering and processing 98% of the cattle in the U.S. Most of those plants are owned by just four companies: Tyson Foods Inc., JBS SA, Cargill Inc. and National Beef Packing Co. Collectively they control 73% of the cattle-processing market. It’s a similar story for chicken and pork.

In good times, consumers can benefit from the considerable efficiencies and economies of scale these companies create (sometimes at the expense of the health and safety of meatpackers). But when things go wrong, as they did last year, such consolidation becomes a vulnerability. In April, just 12 plant shutdowns idled 25% of American pork-processing capacity and 10% of beef. Analysts said that the U.S. was on the brink of dangerous protein shortfalls, Tyson took out full-page ads warning that “the food supply chain is breaking,” and President Donald Trump issued an executive order demanding that meat plants stay open.

There was no shortage of animals to slaughter. Farmers and ranchers had plenty ready for harvest. The problem was a lack of viable alternatives to the big consolidated slaughterhouses. With nowhere to ship their hogs and cattle, and new animals lined up for their spots in the barn, many farmers had no option except euthanasia. (Minnesota spent more than $6 million helping desperate farmers with “depopulation and disposal efforts.”) Nationwide, as many as 800,000 hogs were destroyed through July — even as Americans were staring at empty shelves and food banks saw a huge surge in demand.

Eventually, plants were able to re-open with more rigorous safety measures in place, and fears of a shortage eased. But a crucial contributor to this bottleneck — which still hasn’t been fixed — was regulation. Thanks to the Wholesome Meat Act of 1967, a well-intentioned attempt to create a national meat-inspection program, producers must use a federally inspected processing facility if they want to sell across state lines. Over the years, the costs of complying with this measure have proved all but prohibitive for small, family-owned companies. In 1967, there were 9,267 livestock slaughterhouses in the U.S. Since then, that figure has declined by 70%, mostly in favor of large processors that can afford all the red tape.

Smaller slaughterhouses aren’t totally out of options. They can run state-inspected facilities “at least equal to” federal ones, for instance. But under those rules they can’t sell meat in other states, except under rare exemptions. Alternatively, they can avoid continuous federal inspection by becoming “custom exempt” processors that slaughter and process animals belonging to others, such as hunters. But the meat they process must then be labeled “NOT FOR SALE” and can only be used by the owner, the owner’s family and non-paying guests.

Restoring resilience to America’s meat supply chain will be a long and contentious process. But any serious effort should start by amending the Wholesome Meat Act so that state-inspected meat processors that meet federal standards can sell across state lines, and custom-exempt processors can sell within state lines. That could expand revenue streams and incentivize more small businesses to invest in meat (including online sales). Meanwhile, states should offer grants to assist custom-exempt processors in upgrading their operations to meet federal standards. Minnesota’s Covid-era Livestock Processing Rapid Response Mini-Grant program offers one good example.

The beneficiaries won’t just be butchers. In recent years, evidence has piled up suggesting that America’s consolidated meat industry is abusing its pricing power and taking advantage of consumers. Restored competition should curb that power, boost consumer choice and reduce prices. Longer-term, a diversified food supply chain should also help ensure that the meat shelves at the grocery store aren’t empty when the next crisis hits.

That would be a win for everyone, from farm to table.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Adam Minter is a Bloomberg Opinion columnist. He is the author of “Junkyard Planet: Travels in the Billion-Dollar Trash Trade” and "Secondhand: Travels in the New Global Garage Sale."

©2021 Bloomberg L.P.

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