Meat packers' profit margins jumped 300% during pandemic - White House economics team

Seaboard

10/12/2021 21:11

By Andrea Shalal
    WASHINGTON, Dec 10 (Reuters) - Four of the biggest
meat-processing companies, using their market power in the
highly consolidated U.S. market to drive up meat prices and
underpay farmers, have tripled their own net profit margins
since the pandemic started, White House economics advisers said.
    Financial statements of the meat-processing companies -
which control 55%-85% of the market for beef, poultry and pork -
contradict claims that rising meat prices were caused by higher
labor or transportation costs, advisers led by National Economic
Council Director Brian Deese wrote in an analysis https://www.whitehouse.gov/briefing-room/blog/2021/12/10/recent-data-show-dominant-meat-processing-companies-are-taking-advantage-of-market-power-to-raise-prices-and-grow-profit-margins
 published on the White House website Friday. 
    Officials studied earnings statements from Tyson Foods Inc
 TSN.N , the chicken producer and biggest U.S. meat company by
sales; Brazil-based JBS SA  JBSS3.SA , the world's biggest
meatpacker; Brazilian beef producer Marfrig Global Foods SA
 MRFG3.SA  which owns most of National Beef Packing Company
 NBEEF.UL ; and Seaboard Corp RIC  SEB.A . 
    Those statements showed a 120% collective jump in their
gross profits since the pandemic and a 500% increase in net
income, the analysis shows. These companies recently announced
$1 billion in new dividends and stock buybacks, on top of the
more than $3 billion they paid to shareholders since the
pandemic began.
    Trade group the North American Meat Institute accused the
White House of "cherry-picking" data.
    "It is no coincidence this blog post appears on the same day
as the Consumer Price Index is released showing gas and energy
prices are up nearly 60 percent over the past 12 months which is
nearly 10 times the rate of inflation for food," President Julie
Anna Potts said in a statement.
    Profit margins - the spread companies are making over and
above their costs - have increased significantly too, belying
the argument that companies are just passing along higher labor
and supply costs, the analysis said, with gross margins up 50%
and net margins up over 300%. 
    "If rising input costs were driving rising meat prices,
those profit margins would be roughly flat, because higher
prices would be offset by the higher costs,"  the analysis said.
    Increases in meat prices accounted for 25% of the rise in
consumer prices for food consumed at home in November, a big
driver in the surge in inflation seen in recent months.
    Tyson increased the price of beef "so much — by more than
35% — that they made record profits while actually selling less
beef than before," the advisers wrote. 
    The companies didn't immediately respond to requests for
comment. 
    The White House, hammered by Republicans over rising
inflation, is scrambling to combat rising prices by clearing
supply chain logjams and tackling what it views as uncompetitive
practices by big companies, which are reporting big profit gains
even as consumers suffer.
    Friday's blog - released after November consumer prices
showed the largest annual gain since 1982 - reflects growing
frustration by White House officials about continued increases
in meat prices, an issue it flagged in September.  urn:newsml:reuters.com:*:nL1N2QA29V

 (Reporting by Andrea Shalal; Editing by Caroline Stauffer,
Heather Timmons and Mark Porter)
 ((andrea.shalal@tr.com; +1 202-815-7432;))