Mises Institute: How the Feds Broke the Meat Industry

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Government breaks things. Then it often rides in on a white horse promising to “fix” the very things it broke.

In the latest example of government claiming it will solve a problem it created to begin with, President Joe Biden has committed to fixing the rising cost of meat.

Overall, meat prices have climbed 16 percent over the last year. Beef prices are up 20.9 percent. Biden says the problem is a lack of competition in the meatpacking industry.

“Capitalism without competition isn’t capitalism—it’s exploitation,” Biden said.

According to a factsheet released by the Biden administration, four processing companies control 85 percent of the beef market. The largest four firms control 70 percent of the pork market and 54 percent of the poultry market.

The Biden plan is to distribute $1 billion in coronavirus relief funds to help independent meatpackers expand their businesses. According to the AP, the plan would also allocate funding to train workers in the industry and improve conditions. The administration would also issue new rules for meatpackers and labeling requirements for being designated a “Product of USA.”

But a question remains—how did a few big corporations come to dominate the meatpacking industry?

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Congress broke the meat supply chain decades ago.

The Wholesome Meat Act of 1967 mandates meat must be slaughtered and processed at a federally inspected slaughterhouse, or in a facility inspected in a state with meat inspection laws at least as strict as federal requirements. Small processors found it difficult if not impossible to meet the federal requirements. The cost was simply too high. Of course, large corporations can bear regulatory costs. As a result, the meat processing industry went through massive consolidation after the enaction of this act.

Since the passage of the Wholesome Meat Act, the number of slaughterhouses dropped from more than 10,000 to 2,766 in 2019. Today, instead of hundreds of companies processing meat, three corporations control virtually the entire industry.

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We constantly hear about supply chain issues due to the coronavirus pandemic. (More accurately, government response to the pandemic.) But the lack of adequate processing capacity due to consolidation was already causing supply issues back in 2015. A report by the Farm-to-Consumer Legal Defense Fund sounded the warning at that time.

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The paper warned that the cost of compliance would have adverse impacts on small-scale slaughterhouses and packing plants, saying “the Wholesome Meat Act was as much of a disaster for many small meat firms as a hurricane.”

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It comes as no surprise that these regulations caused a massive consolidation of the meat processing industry. And it’s no surprise that this consolidation has led to supply chain breakdowns. Centralized systems are brittle systems. They lack redundancy. They lack escape valves. They are prone to fail under stress. This is true of supply chains, economies and governments.

In other words, this was entirely predictable.

But now Biden wants to fix what the federal government broke by throwing more money at it.

Here’s an idea: why not just do away with federal control?

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More generally, states with “food freedom” laws that allow small producers to sell food outside of the established regulatory structure have not seen increases in foodborne illnesses. According to Forbes, representatives from health departments in Wyoming, North Dakota and Utah reported exactly zero outbreaks of foodborne illnesses connected to a business operating under a food freedom law.

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In a sense, Biden is correct—the U.S. needs more players in the meat industry. But the government created the problem and there is zero self-reflection or ownership of responsibility. Only promises to fix what the feds already broke.

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