economy politics william barr

William Barr Ain’t Good For Much, But Maybe He Can Break Up Meat Monopolies

If there's anything you can count on Trump to safeguard, it's America's right to cheap burgers.

Just days ago, after chatting with executives at meatpacking companies, Donald Trump declared that his administration had “solved their problems”.

“We unblocked some of the bottlenecks”, he said, in a characteristically hapless effort to delve into the specifics of something he knows very little about.

For weeks, the industry has struggled to convey the urgency of the situation after coronavirus outbreaks at multiple facilities forced closures, upending the country’s meat supply chain, further imperiling the fortunes of America’s beleaguered farmers in the process.


Trump signed an executive order mandating that the facilities remain open, but as discussed here at length last weekend, the problem is far from “solved”. Indeed, wholesale beef and pork prices have surged, some Wendy’s locations recently ran out of burgers and talk of bare supermarket shelves persists.

Part of the problem is industry consolidation. Simply put, it’s an oligopoly, which means that when something goes wrong (in this case a deadly virus begins to spread virtually unchecked at processing facilities), the entire supply chain effectively breaks apart overnight.

Tyson, along with JBS and Cargill, together control about two-thirds of the country’s beef, most of which gets processed in a handful of large facilities like those which have been affected by the epidemic. In the wake of the crisis, lawmakers and state attorneys generals began pressing for investigations.

Well, guess what? The Justice department was already investigating. According to a source who spoke to Bloomberg, the DoJ began probing the companies for possible antitrust violations prior to the pandemic. The investigation is described as being in the “early stages” and “follows a criminal investigation into possible price-fixing by major chicken producers”, Bloomberg notes.

Earlier Thursday, The New York Post said Wendy’s is looking into possible price gouging. “The burger chain’s board on Tuesday agreed to explore whether its beef suppliers are unfairly hiking prices under the guise of a national meat shortage”, a source said. A company spokesperson for Wendy’s later denied the report.

In the same article, The Post cited another source in tipping the same DoJ probe, noting that the department “has been investigating beef suppliers, including Tyson, JBS, Cargill and National Beef, for possible price fixing since before the pandemic sent prices skyrocketing”.

Trump said this week he’d ask the DoJ to look into the situation on request from nearly a dozen states.

In addition to the DoJ probe, the USDA is looking into meatpacking margins, which have surged over the course of the crisis for a simple reason: The inflationary side of COVID-19 is driving up retail prices for meat, while the deflationary effects have put downward pressure on the prices processors have to pay for cattle. Here’s the Farm Bureau to explain (and that linked article is highly informative, by the way):

With the dramatic spike in the cutout and drop in fed cattle prices, packer margins significantly increased. This is to be expected if the price of a business’ output rises and the price of its input falls. The Livestock Marketing Information Center maintains a database of calculated gross margins on a 1,000 lbs.-of-steer basis. These calculations are essentially the spread between inputs and outputs and do not include processing costs (energy, labor, etc.) and fixed costs. However, they still offer a good measure of the overall relative health of packer margins, and right now they are exceedingly healthy, as shown in Figure 5 with data current as of March 21. Since the last week of February, the live-to-cutout spread has more than doubled, rising almost $275 per 1,000 lbs-of-steer.

That was on March 21. As you can imagine, some lawmakers are concerned that meatpackers are taking advantage of the crisis the same way they allegedly capitalized during the fire mentioned in the excerpted passage above.

And, so, Sonny Perdue is investigating. “[The] USDA’s Packers and Stockyards Division will be extending our oversight to determine the causes of divergence between box and live beef prices, beginning with the Holcomb Fire last summer and now with COVID-19”, he said last month.

The newly revealed DoJ probe thus makes two federal investigations for the meatpacking industry at once. This comes as companies are almost surely destined to find themselves on the wrong end of coronavirus-related lawsuits (indeed, some litigation is already pending).

The Trump administration has indicated a willingness to help alleviate some of the liability related to the crisis, a pledge that now seems highly ironic given that the president’s own Justice department is investigating the industry for possible antitrust violations.

From a macro perspective, the margins story strikes at the heart of the great debate over whether the coronavirus is a deflationary supernova, a harbinger of inflationary dynamics down the road, or both. In the near-term, meatpackers have apparently benefited on both sides. But that’s small comfort considering their predicament on the frontlines of the COVID war.

All of this on a day when William Barr dominated the political news, first by dropping the case against Michael Flynn thus sparing Trump the bad optics of pardoning him, and then by telling  CBS he plans to overturn Obamacare later this year.

As ostensibly earth-shattering as those developments are, neither story is at all surprising.

Frankly, we’ve reached the “resistance is futile” threshold, beyond which documenting the country’s ongoing descent into outright autocratic governance is pointless. If you’re wondering whether there is any precedent whatsoever for the Justice department tossing a high profile case where the defendant has pleaded guilty not once, but twice, the answer is absolutely not.

I suppose the best we can hope for out of the Justice department now is for Barr to save us all from monopolistic meatpacking practices and to shield Wendy’s from pandemic price gouging.

If there’s anything you can count on Trump to safeguard, it’s America’s right to cheap burgers.


 

4 comments on “William Barr Ain’t Good For Much, But Maybe He Can Break Up Meat Monopolies

  1. Sadly this effort of command, control, taking credit and fixing blame will not right the Meat industry. There will be another crisis and one that is precipitated prior to November 3rd. In addition the farmers will be seeking long term solutions and they will not get one. Serving handily to Further erode his base. Your writing here is the antidote to lying buffoonery people cannot resist when others are sure of their convictions, are calm and are kind to every person. In the end his base will wake up to the fact of having been fed bat shit all along from a crazy man. It will be a painful reawakening for many.

    • gdhalpha says:

      “In the end his base will wake up to the fact of having been fed bat shit all along from a crazy man”

      This should’ve happened by now. That it hasn’t doesn’t give me a lot of hope that it will.

  2. I think you mean cheap “hamberders”.

  3. And, hopefully, this madness will end in November. Lots of ammunition for the Democrats. Probably don’t know where to start.

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