Biden Administration Pushes for Meat Processing Diversification

 When we think of a meat butcher, many of us think of the familiar picture of the portly gentleman in a white smock, preparing cuts of meat right down the road for us to purchase fresh as can be.  And of course, we all know this picture is largely outdated, save for a few exceptions.  Instead, the modern meat packing plant consists of a huge team of employees all trained with highly specialized skills (rather than the broad-spectrum knowledge of butchers in the past).  The production line is essentially a (dis)assembly line, with each worker making a limited number of repetitive motions to accomplish one narrow portion of the butchering task, as the product moves by at a set speed on meat hooks and conveyers.  Employees work in close proximity to one-another, and conditions are ripe for a highly contagious disease like Covid-19.  The meat packing industry has also consolidated over time,  just like every industry has, with the bulk of the supply moving through a few large conglomerates like Tyson, Cargill, or Perdue.  And just like every other industry, the Covid-19-related supply chain disruptions in the meat industry laid bare the vulnerabilities inherent in this design, to the detriment of (nearly) all of us.

The Covid disruptions to the meat industry were vast, and the consequences will no doubt be felt and studied for many years into the future.  We will not recount them here, save for a few comments.

In broad strokes, the supply chain in the big three meat supplies (beef, chicken, and pork) experienced disruptions due to Covid-19 outbreaks in their plants.  Up to 300 meat-plant workers have died due to Covid-19 since the start of the outbreak, and the meat packing industry had to rush to implement safety protocols and safety equipment for employees.  Additionally, employees who fell ill, or were in contact with a positive Covid-19 case had to stay home, which greatly reduced output at the plants.  Additionally, buying and selling of live animals at auction was modified to reduce the spread of Covid-19, which reduced the number of buyers in the market, and reduced the information available to buyers (who now had to bid based on a scratchy webcam image of the animals).  Due to the low number of buyers, supply built up on the producer-side, and the small number of bidders meant prices dropped precipitously.

Meanwhile, demand for grocery-store cuts soared, and demand for restaurant-cuts dropped precipitously during the pandemic, as people were forced to cook at home, and then see-sawed back the other way as the economy reopened.  Due to the worker shortages, the extreme changes in demand, and the high total demand, prices increased dramatically on finished cuts, while farmers were getting paid significantly below cost to produce the animals.  Meanwhile, due to the high demand and high prices for finished cuts, the meat packing industry has been making record profits, while many others in the industry are suffering.

With this in mind, the Biden administration has announced that it will be exploring options on how to improve competition in the meat packing industry, hoping to support more small, local butchers, and giving farmers options outside of the existing oligopoly.  Such a diversification will also decrease prices for finished cuts, as the competition between packers will drive prices down.  And with many smaller packers, the resilience of the meat supply chain will increase, and plant shutdowns will have a smaller effect on the market, since the concentration of the supply chain will be greatly diminished.

The Biden administration is pledging around $500 million to help build out new and existing facilities, and includes an additional $150 million specifically for very small producers.  Of course, these changes will take years to come to fruition, but better to have them underway (or at least under discussion), rather than have no forward thinking at all.  Specifically, TLR utilizes a very small processor (Creston Valley Meats), which could greatly benefit from these changes.