Tyson, Cargill and other meat giants will face new regulations cracking down on discriminatory and deceptive contracts with the farmers who grow their chicken and beef, part of the Biden administration's effort to lower consumer food prices by tackling corporate consolidation.
The U.S. Department of Agriculture on Tuesday unveiled a long-awaited final rule updating the century-old Packers and Stockyards Act, which aims to promote competition in livestock, meat and poultry markets. The new standards, which go into effect May 6, in part prohibits meatpackers from retaliating against growers who explore business relationships with competitors.
“[This will] help producers and growers who have become increasingly vulnerable to a range of practices that unjustly exclude them from economic opportunity," Agriculture Secretary Tom Vilsack told reporters.
A flurry of mergers and acquisitions in the latter half of the 20th century has paved the way for just four firms to control the majority of beef and poultry markets. Half of all broiler growers, for example, have two or fewer processors for which they can raise chickens.
A consolidated market has allowed meatpackers to wield inordinate power over their growers, often requiring producers to substantially invest in infrastructure or operations as part of their contracts. Growers have complained that they are often unaware of these costs and a lack of contract transparency prevents them from making informed business decisions.
Under the new rules, meatpackers will be prohibited from discriminating against growers based on factors including race, religion, disability or whether a producer is part of a cooperative. They also will be banned from omitting material information in contracts and cannot include false or misleading statements.
Stringent enforcement of competition regulations are meant to complement transparency rules announced last November, which require poultry companies to clearly lay out contract requirements and any investments required by growers.
Increasing competition in the meat industry has remained central to the Biden administration's plan to address inflated grocery store prices. However, beef and chicken industries alike have warned of potential unintended market consequences, including higher compliance and litigation costs for companies.
The National Chicken Council said in a statement Tuesday that the new rules are falsely "deflecting the blame" of higher food prices onto meatpackers, claiming that onerous regulations are what's raising costs.
“The Biden administration and USDA are sprinting to complete their anti-business regulatory agenda ahead of Election Day, an agenda being driven by far-left activists, anecdotes from a handful of disgruntled growers, and trial attorneys who are seeking to shape the regulatory environment to line their own pockets," National Chicken Council President Mike Brown said.
A USDA study in January found that packers have been able to reduce prices paid for cattle since 2016 due to high concentration and limited packing plant capacity. However, the study also found that increased concentration has historically led to lower prices for consumers as companies achieve economies of scale.
