Tyson Foods Rejects White House Claims on Consolidation, Profiteering

Tyson Foods Rejects White House Claims on Consolidation, Profiteering
The Tyson Foods corporate logo. The Arkansas-based meat giant is pushing back against White House claims of consolidation and profiteering.

Tyson Foods Inc. of Springdale said it “categorically rejects” claims by officials of President Joe Biden’s administration that consolidation among protein producers was the main cause of higher prices for consumers at the grocery store.

At a Sept. 8 press briefing at the White House, National Economic Council Director Brian Deese said four major companies control between 55% and 85% of the three major protein groups: beef, poultry and pork. The White House released a report the same day detailing how the rise in protein prices since December 2020 accounts for half of the increase in consumers’ food bills.

The White House said beef prices have risen 14%, while pork has increased 12.1% and poultry 6.6%.

If you look at that market, the thing that is striking is — across beef, poultry, and pork — significant consolidation in those industries,” Deese said. “So anywhere from 55 to 85 percent of the market is controlled by the top four producers in those industries. And so when you see that level of consolidation and the increase in prices, it raises a concern about pandemic profiteering — about companies that are driving price increases in a way that hurts consumers who are going to the grocery store, and also isn’t benefiting the actual producers — the farmers and the ranchers — that are growing — are growing the product.”

Deese mentioned JBS of Brazil and Tyson Foods as two of the major four companies. A third is identified in the report: Smithfield, a subsidiary of WH Group of China. 

Tyson Foods was quick to respond, alluding to a report by the U.S. Department of Agriculture that it said shows that none of the price inflation was related to consolidation. Tyson said beef prices have increased due to “unprecedented market conditions.” 

“Multiple, unprecedented market shocks, including a global pandemic and severe weather conditions, led to an unexpected and drastic drop in meat processors’ abilities to operate at full capacity,” Tyson Foods said in a released statement. “This led to an oversupply of live cattle and an undersupply of beef, while demand for beef products was at an all-time high. So, as a result, the price for cattle fell, while the price for beef rose. Today, prices paid to cattle producers are rising.”

Deese and Secretary of Agriculture Tom Vilsack spoke of the actions the administration was planning to combat rising food prices. Vilsack said he spoke with a rancher who lost $150 a head for his cattle at a sale but the processor made $1,800.

And I would just simply say, you know, there’s reason for concern here,” Vilsack said. “The Department of Justice recently had a price-fixing case involving Tyson, where clearly there was some wrongdoing that took place.  And so it’s not something that we are — you know, it’s not something we’re dreaming up here. The profits are real.”

In January, Tyson Foods agreed to pay $221.5 million to settle a lawsuit that alleged it conspired with others to fix wholesale chicken prices of the “Georgia Dock,” a major price index. The U.S. Department of Justice joined the suit in 2019, and Tyson Foods said it would cooperate with the investigation.

Tyson Foods said labor shortages have “exacerbated” the price pressure in the protein industries. It said it pays its frontline employees an average of $22 an hour and has recently upgraded benefits. 

The company said consolidation has led to “healthy competition” and rise in quality and more affordable beef prices the last 25 years. Tyson Foods said USDA data shows that producers’ profit margins have been more than processors’ in most years except this past year.

“Tyson’s scale allows it to operate efficiently, which keeps costs down for consumers,” the company said. “At Tyson, we rely on independent farmers and want them to succeed, because without a steady pipeline of livestock, we can’t run our business. In rural communities across America, every year, we invest more than $15 billion with 11,000 independent farms supplying us with cattle, hogs and chickens.

“Tyson Foods is committed to working with the Administration, the U.S. Congress and others to find ways to better feed this growing country —  and keep consumer prices affordable. We welcome a deeper discussion on all of the issues raised today.”

Vilsack said the Biden Administration was taking four steps to combat rising food costs. The first was the strengthening of the regulatory Packers and Stockyards Act to find and punish unfair and discriminatory practices.

The issue is what tools do we have, if there is an unfair practice taking place, if there’s a discriminatory practice,” Vilsack said. “If the poultry system is not treating poultry producers fairly, what tools do we have?  Right now, we don’t have very strong tools.  We are strengthening those tools so we can call out bad behavior.”

Vilsack said the administration is also focused on making more price discovery available and providing more transparency and information about U.S. product labeling in stores. Vilsack said the administration was also providing up to $160 million in aid to small processing companies and $500 million for state and local governments to find ways to expand processing capacity.