U.S. Food Prices Are Up. How Monopoly Power Makes this Worse
S E E D E D C O N T E N T
2021 was a bad year for grocery bills. Shoppers paid 6.4% more for groceries in November 2021 compared to November 2020, according to the consumer price index. All food prices were up a bit more than usual but the most dramatic price increases come from meat, pork cost 14% more than a year ago and beef cost 20% more. These increases are slowing, per consumer price data released January 12th, but show no signs of dropping to pre-pandemic levels anytime soon.
Foodcompanies say rising prices are merely free markets at work—extreme weather and pandemic disruptions increased production costs and diminished the supply of food while demand increased in the U.S. and abroad as people started to emerge from the pandemic. But the Biden Administration and politicians such as Sen. Elizabeth Warren allege foul play. They argue that industry consolidation, especially in meat processing, helps a handful of corporations profit off inflation expectations by raising prices even further. In some respects, both sides are right.
Food companies do face legitimate increased costs and unique shortages, but these aren't eating into their profits as economists might expect. In fact, the largest publicly traded companies have never had higher profit margins. Such record earnings suggest that food companies have sufficient market power to pass all their higher costs, and then some, onto consumers. Basic economic theory tells us that when a business charges too much, competitors will offer lower prices, take sales, and erode excessive profit. Sustained, exceptional corporate profits raise the question: how much are food companies really competing? And if corporate consolidation helps competitors raise prices together, what will it take to tame price gouging?
Food markets have been out of whack since the pandemic began. Meat prices first shot up as workers fell sick, plants shuttered, and as much as 40% of processing capacity went offline in spring 2020. Plants are back up and running but after some 86,000 meatpacking workers contracted COVID-19 and 423 died, according to a Congressional report, many meatpackers are struggling to fill openings and raising wages. Across the food supply chain workers are coming back from the pandemic and rejecting excessive hours, unsafe working conditions, and stagnant wages that haven't kept up with productivity growth for over 40 years. For instance, in 1982 the base pay for meatpacking workers in the United Food and Commercial Workers (UFCW) union was $10.69 or $29.14 adjusted for inflation. In May 2020 the average hourly wage across the industry was $15.
While food companies focus on growing labor costs as the main source of their woes there are a bevy of other factors driving shortages and new expenses. Cattle and hog herds shrunk a bit last year in hard times. Wheat, corn, and other grain prices are at their highest since 2012 due to drought and high demand from China, raising key food input costs. Other crop prices such as sugar, tomatoes, and melons are also up due to extreme weather events. Even food packaging shortages persist after a cold snap shut down Texas plastic refineries. Throw in gnarled ports and shipping delays and companies are paying more to get food on grocery shelves. All the while demand remains high as restaurants reopen, Americans buy more food than pre-pandemic, and other countries import more U.S. beef and eggs.
Companies say that's the whole story. But there's evidence that monopolistic market structures are making things worse. Food production has consolidateddramatically since the 1970's after changes in antitrust policy allowed more companies to buy up their competitors. Depending on who you ask, antitrust practitioners say markets are "oligopolistic" or dangerously concentrated when the top four firms control 40% to 50% of the market, or more. Higher levels of concentration give businesses more power to set prices and increase the likelihood of price-fixing or market manipulation. Today, the top four corporations control more than 60% of the U.S. market for pork, coffee, cookies, beer, and bread. In beef processing, baby food, pasta, and soda the top four companies control more than 80% of the U.S. market.
With tight control over production food companies have more power to exploit pandemic disruptions and unfairly raise prices. The White House recently argued as much in a brief published in December and a January roundtable with farmers and ranchers. Monopolistic price gouging is admittedly hard to prove, but the Federal Trade Commission is on the case. In late November the antitrust enforcer requested that Walmart, Kroger, Kraft, and Tyson, among others, hand over information in an investigation into price hikes and food shortages.
There is one clear indicator of excessive monopoly power: record corporate profits. If rising food costs only reflected higher production costs, economists wouldn't expect net profits to rise, yet they are at historic levels. Non-finance corporations are reporting their largest profit margins in 60 years. For some 100 of the largest publicly traded companies these profit margins are 50% higher than in 2019. Net profit margins for top meat companies Tyson Foods, JBS, Marfrig, and Seaboard are up over 300%, according to the White House. Tyson earned $1.36 billion in the 2021 fourth quarter, more than twice as much as last year. McDonald's, Coca Cola, and Kraft Heinz also reported better than expected fourth quarter profits.
With all the media hype about inflation, companies may take advantage of shoppers' inflation expectations to charge a little extra and pad their pockets. Analysis of corporate earnings calls by Business Insider and More Perfect Union reveal that food corporations such as Pepsi, Kroger, and Kellogg's are bragging to investors about their ability to increase prices. Tyson told their investors that their "pricing actions … more than offset the higher [cost of goods]." Even Jerome Powell, chairman of the Federal Reserve, acknowledged at a Senate Banking Committee hearing Tuesday, Jan. 11, that companies are "raising prices because they can."
Consolidation makes it easier for companies to raise prices in tandem. When only a handful of companies can see that all their competitors are charging more and making record profits there's little pressure to aggressively compete. Economists who question this theory argue that food sectors have been concentrated for decades without ever raising prices like this. But economist Hal Singer, managing director of Econ One, notes that colluding businesses usually need some cover, such as generalized inflation, to get away with more jarring price hikes.
Further, even before the pandemic food businesses have been charged with conspiring to raise prices in more subtle ways. Since 2016 private plaintiffs have accused meat companies of fixing prices by allegedly coordinating supply cuts in every major meatindustry. One case estimated that this conspiracy allegedly cost the average family of four an additional $330 on chicken per year. In the last two years the Justice Department has sent canned tuna executives to prison for price fixing and indicted ten chicken processing executives in an ongoing investigation into industry big-rigging. Corporations such as Tyson and JBS have paid tens of millions to settle private and federal cases.
So if corporate power has a role to play in making recent inflation worse, can antitrust action stop it? That depends.
In early January the Biden administration rolled out a plan to boost meatpacking competition by investing in new plants, but even if new competitors managed to get off the ground (a big if) it would take years before they made a dent into current pricing dynamics. In the near-term antitrust enforcers could investigate companies for price fixing conspiracies, which might make executives think twice about further price hikes. Indeed, somepolicywonks are arguing that, much like President John F. Kennedy's public attacks on steel companies, President Biden's pressure on meatpackers contributed to a 2% and 0.8% decrease in beef and pork prices in December, respectively. In this sense fear of antitrust enforcement and the bully pulpit against corporate profiteering could dissuade price hikes.
However, this does not change the concentrated market structures that facilitate both explicit or more tacit collusion in the first place. Antitrust enforcers need to bring back merger standards that deem market concentration presumptively harmful past a certain point (say, the four largest firms controlling 40% of the market). Enforcers should also consider unwinding key mergers or breaking up particularly concentrated industries, such as meatpacking. Finally, both the Federal Trade Commission and the U.S. Department of Agriculture should issue stronger fair competition rules to level the playing field going forward. Not only would these actions challenge food corporation's market power but restructuring industries could help deconcentrate key choke points and make supply chains more resilient overall.
A long-term food supply chain resiliency plan should also look beyond just antitrust to reign in corporate recklessness. If the pandemic taught us anything it's that the food supply is only as secure as its workers are. For all the talk of a labor shortage, food worker surveys suggest the real issue is a shortage of living wages and dignified conditions. And while many food companies announced plans to expand processing capacity this year, these announcements come after years of cutting capacity toplease Wall Street. Congress and the Biden administration need to consider regulations that make corporations put workers' well-being and resiliency above short-term profiteering for investors, such as passing the PRO Act to strengthen unions and give workers a greater say in business decision-making.
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We are all suckers.
Capitalism!!!
Capitalism!!!
Ain't it awful! We need centralized government planning along with wage and price controls
/s
Conservatives love to ripped off by corporations. Freedom baby !
This is the Biden narrative. It's not inflation caused by government spending, it's greedy Capitalists.
Some here thought that $Tillion budgets are normal now.
Lol .... it’s all they got Vic. Anything to redirect peoples attention away from the real problem.
Their inept handling of basically everything they touch. We are now experiencing Jimmy Carter economy 2.0
In the end it is good though. Younger folks who didn’t experience that back in the late 70’s early 80’s now get to see what it was like.
Enjoy!
Jimmy Carter was the second worst president in history (between Biden and Obama) and even the grinning peanut farmer never gaslighted us the way these people do. Telling us that inflation is caused by greed is child's play.
Unlike Biden I liked Carter. He’s his own man and a good one IMO but .... like Biden he was totally ill prepared to properly handle the issues of the day and listened to the wrong advisors.
Sound familiar?
Conservatives love to ripped off by corporations.
Lol. you know corporations love regulation, right? It's one of their biggest competitive advantages over the small companies that democrats hate.
The article is from Time magazine, not the Biden white house.
It probably made too much sense for the right wingers to believe.
You believe in this?
There isn't much difference John
Maybe we should ask Newsmax or OAN what they think.
Absolutely NOT! That just trades one master for another. The key is fair competition and smaller (less powerful) corporations. The key, in short, is for the consumers to be in control.
Did you miss the.... /s
No. But the fact that you chose to make the comment suggests that you think a significant number of people actually want what you described.
Ergo my comment.
The assumption, of course, of that statement ( 4.1.2 ) being that capitalist/corporations have the responsibility to suck every cent out of the consumer as quickly as possible.
Which is known as greed.
I think he's referring to a very few specific people.
Who knows?
But there are very few people I know of in the USA who want: "centralized government planning along with wage and price controls". After all, that was the core of the economic system of the former USSR.
There are several on this forum, however, who do.
I did not know anyone here wanted to follow the abysmal economic model of the former USSR. Actually want central planning with bureaucrats in charge of setting both prices and wages?
Five responses from the right, none of them addressed the argument in the article. Par for the course.
I doubt they even read it.
It would take reading the article to make a coherent comment.
[deleted]
Seems the idiots never heard of supply and demand. The rarer/scarcer something is; and the more demand for it; the more it costs. Corporations do not pay taxes, the people that buy their product do at the time of purchase. Any price increases whether by the government taxation; or increase in basic materials cost, fuel, labor, etc is instantly passed on to their customers. If the customers want to pay the increased prices the demand stays high. With the shortages going on world wide how can Democrats be shocked that prices are surging?
Maybe if they stop passing stimulus the amount of money in the system will go down. Which will mean people that currently aren't working due to the renters' moratorium- and never ending stimulus checks; will have to get off their asses and get back to work! Instead they are waiting for pay to increase to the point that it is worth it to them to go back to work. Knowing full well the Democrats will bail them out with yet another stimulus bill. Once the "free money (aka insane amount of debt to future generations)" stops, then the demand will drop because people will no longer be able to afford expensive items. That will force them to get back to work; which will ease the labor issue and increase production further driving down costs- while increasing the supply.
Funny how Democrats never had a problem with any of this before. It was until the human fuck up machine was put into office; and it started to make Democrats look bad; that this became a major issue.
Bingo. Supply is low, prices are high. Supply is a glut, prices low. They can get what they want price wise unless and until someone or something comes along to increase the supply and induce competition again.
Sounds to me like Tyson deliberately contributed to inflation in order to make their investors happy.
Spoken like a person who has never owned and/or understood how to run a business.
Business 101:
all costs of product/services being offered must be tabulated and covered in price charged for product/service. Along with a profit on top of that if you want to stay in bidness.
Costs go up, so does end price
Spoken like someone who didnt read the seeded article.
Comment on the article, if you can. That is the topic, not your own faith in your own expertise.
Sounds to me like they have noticed a supply problem and have decided to capitalize on it. You know, sort of how the oil/gas industries work.
So you admit that inflation is at least partially being fueled by corporate greed. That is what you are saying you know.
Aw John, my comment was responding to yours. So if mine was off topic so was yours.
Honestly, I thought left wingers were supposed to be smart. At least that is what they keep telling us.
All you have to do is comment on the arguments made in the seeded article. That doesnt seem to interest you though.
I'm well aware of what I am saying. And the answer is yes they are partially to blame.
According to that logic, none of the employees pay taxes either, the customers are paying it for them...
This is a discussion board John. Not an agree only with JR board.
ok
Not even close to what I said. Please explain how that logic works.
Progressives have been "complaining" about excessive corporate profits for a hundred years.
And they have been wrong for over a hundred years.
So the pay gap has not increased?
I think you are on the wrong seed.
Uh huh...
Yeah huh .....
You are happy to have corporations rip you off because it suits your idea of capitalism. Its kind of that simple.
What is even more simple is unless I have dire need, I won't buy their shit and/or look for an alternative.
Wrong again John and don’t try to put words in my mouth. You nearly always get it wrong.
You mean like I’m not on Facebook or Twitter .....
They have been taking money from those self same corporations as well for all that time in the form of campaign contributions. They also own major stock in all of those corporations; and take free flights on all of those corporation private jets.
Funny how the Democrat sheeple never seem to complain about it; or force them to stop.
Yep. And the next paragraph signals another culprit. To Wit:
The so called "Law" of supply and demand is not a law. It is a suggestion and convenient trope that people trot out as an excuse for price gouging. There is, to be sure, some relation between the two, but as can be seen, it is the perception of limitation and need created by society at large and perpetuated by the business community that has given the green light to all businesses to raise prices.
Society at large cannot rein in corporate greed because too many people believe that it is just the way it is, like the sun coming up every day.
They have this notion that wealth = success = 'the American dream' and do not seem to stop to think that wealth is sometimes achieved through exploitation. They also do not seem to distinguish between the healthy entrepreneurial spirit and small 'c' capitalists (the actual American dream) vs. the monopolistic, controlling large 'C' capitalists that have far too much control over society.
Cool, let’s regulate the big C’s.
That includes companies like Facebook and Twitter. Now we just need to decide who does the regulating, what gets regulated and who regulates the regulators.
Think we can get any agreement on that?
Regulation, by definition, is done by the government and given these are national and transnational corporations, this means the Federal government and thus, in particular, the Federal Trade Commission.
What gets regulated is very complex. Antitrust is a complex business. 'Fairness' is elusive.
Ideally this would be the American people. Thus one option is to use elected officials (could be elected by state legislators ... plenty of options). Many factors to consider here as well.
Ultimately do not hold your breath since our politicians are deeply tied with the entities they would be regulating so there is no motivation to move in this direction.
we agree on that.
Okay, then what are your answers to your questions?
I don’t disagree in concept with anything you’ve said. The problem is putting it in practice with some kind of agreement. The left tends to want more regulation, the right tends to want less. There will be no agreement.
It’s like we do need to split the country up. One highly regulated, the other not, with total freedom of movement one way or the other. Any bets on which side will grow the fastest?
We agree on your first paragraph. I took your second paragraph as musing rather than you suggesting this is what you would want.
The first paragraph leads into the second. Of course that is not what I want but we don’t always get what we want do we?
I believe our country is more polarized today than it was before the civil war. If something doesn’t change we will have another one IMO. Perhaps not tomorrow, not next week, not next year or longer but it is coming based on the divide that exists today.
It is inevitable unless something changes. Like dividing the country in two as a change. Perhaps you have the magic pill to fix it all so something like that isn’t required. Do you?
No, of course I do not have a solution for political divisiveness. Unfortunately it would take something like a great event (e.g. a world war) to bring people together. But even then one wonders given the great event of the pandemic has become a divisive wedge in our nation.
Not a promising horizon.
Yeah, not as bad in reality as many are trying to spin it but too many sheeple on both sides buy the narrative being spun hook line and sinker.
Thus polarizing the situation more than it needs to be. Everyone can’t get their way but now we have Generation N in action so it’s viewed as worse when it really isn’t.
Still waiting for an answer to the question posed in 7.1.6
You are? Why? Your question did not strike me as probative or even supportive to the point you made but rather a question in passing:
No, I have no bet to make on that.
No problem, I’ll chaulk it up as another question you refuse to answer. Nothing new there .....
Why is it that you turn every conversation with me, even when the discourse is entirely civil and thoughtful, into a lame attack?
Further, I answered your question: you asked if I have any bet on which side will grow the fastest and I answered that I do not have any such bet (because I do not).
It is especially rich considering you are pretty far on the conservative side of most things...
Without going full on Trump fanatical krazy!
Not sure I am that 'far' on the conservative side. Certainly fiscally, but clearly not socially. I will say though that —in aggregate— I find the left making vastly superior arguments than the right nowadays. And I most definitely think those who continue to support or even defend Trump have lost all sense of honor and integrity as it applies to the office of president.
I don’t.
Why is it you won’t answer a simple question after you have been given that same courtesy by others? It strikes me as extremely sophomoric.
And the “you want to bet” phrase is well known, oft used and normally not meant to be taken literally as a literal bet but is only a simple question.
Again, you being too literal but if you don’t want to answer the question, be a man and simply say you don’t want to. Instead of resorting to your usual pseudo intellectual thinly veiled insults
Hate to break it to you but if your question is which side will grow the fastest, he actually answered the right way.
No way one can know and saying one does is just conjecture...
My answer was that I have not formed an opinion on the question. Boils down to "I am not sure" or "I do not (yet) know" or equivalent. Figure it out. I am confident rational minds can easily comprehend what I wrote.
You continue to troll.
Lol .... hate to break it to you but you are wrong once again. On all counts.
Businesses are not going to seek out more regulation. Not and be competitive. Business 101 ....
Agreed. This is what happens all the time if one is not solidly aligned with a particular group (group-think conformism). Make a comment that aligns with the right (e.g. favor much stronger fiscal discipline) and some on the left think you are conservative. Similarly, acceptance of abortion makes some on the right think you are a liberal. It is mindless and naive, but happens all the time.
Again, you are talking what if scenarios where no one knows any exact answer.
And you continue with your usual BS. You didn’t answer the question at all out here in real world Maybe in your head you did but no where else. Here is your “answer” to my post.
No answer there and no amount of gaslighting will change that fact.
And more sophomoric insults from you .... sad, just sad. You need a new shtick .....
Spoken like a person who has never owned a business and/or never had to deal with over-regulation.
You have no idea what you are talking about.
So you get caught up in your own bullshit and the response is to insult...
Not surprised.
Wow. I don't often find common belief with you lately on anything.... Mindless and naive absolutely!! Unless one has an undying hatred towards anything Donald J Trump, then some take a decided walk into mindless and naive...
But sit that aside and it is astounding how much beliefs can start to align...
Your three points here 100% agreement...
Wrong again ..... amazing!
Now you move the goalposts on Ender. You wrote this:
You laid out support for two extremes: High regulation (correlates with the more statist liberal views) and total freedom (correlates with libertarian views).
You asked which side will grow the fastest. One side = statist liberals and the other side = libertarians. Human beings, not businesses.
Now you want to make one (or both) of those sides 'businesses' instead of individuals. Well, that changes everything. So let's change your original question to be more specific per your latest comment:
It’s like we do need to split
the countrybusinesses up. One group of businesses that want to be highly regulated, the other not, with total freedom of movement one way or the other. Any bets on which side will grow the fastest?Well, let's see, who would think any business would want big government breathing down its neck?
A clear question: Will businesses grow faster with or without regulation?
A clear answer: They will grow faster without regulation.
You saying that does not make it so.
Lol .... my apologies if the original question didn’t meet your high internet standards but thanks for finally answering it just the same.
I agree.
Lol .....right back at ya. Now you can have the last word ..... I tire of your nonsense.
Imo the non regulation for business would grow faster yet eventually burn itself out. It would rape and pollute the lands until they would be uninhabitable.
Good, see ya....
I agree in principle. Entirely laissez faire operations would end very badly.
What do you believe is a fair profit margin?
Don't know about "fair", but when prices rise and profits go up, somebody along the way said to raise the price, not out of necessity but out of wanting more money, or, more colloquially, out of greed.
The whole perception of scarcity has lingered as the pandemic has drawn out longer and longer, causing unease in the population at large. Certain areas have seen a need for higher prices and certain areas have not. The areas that have seen the need for higher prices (I believe) are directly correlated with other areas in which the opportunity, not the need, to make more money through the raising of prices occurred as the result of actual scarcity of a commodity. Those sectors, such as shipping, saw prices raise as a function of demand. Their reaction to that demand, through either their own initiative or through offers from people whose desire to move the goods was high, was to raise prices. This is pretty much classical supply and demand. Across the board inflation, on the other hand, is driven by the perception that, "Everybody else is getting some. I need to get some, too!" That is pretty much what we are seeing now, and was facilitated by all the hand-wringing going on by the so called economists. It is not the only choice that we had, but merely a self fulfilling prophecy.
I think we all need to remove ourselves from money by a couple of steps. This space will allow us to gain a better perspective on why and how things happen regarding money, and to stop this emotional, gut level reactivity from all sides whenever their favorite economic theory is questioned. Remember, people created both money and the concept of "wealth." The paradigm which we view money through should be cognizant of this and realize that, as it's creator, we should also be its controller, not the other way around.
Fair enough. What has lead you to that belief?
I think the data indicates most Americans are so ignorant about how money works that I'm not sure it's possible to remove themselves any further.
Will be interesting to see what some think a solution is .
My solution is to make purchases smartly and not contribute to the problem. I own a lot of stuff, and a large percentage of it was purchased used from Craigslist or market place or resale shops for pennies on the dollar. Inflation does not negatively impact those purchases, and sometimes has a positive impact. When people need money they may sell something cheaply to get it. Rich people sell stuff cheap all the time. No lie - I once bought all the high end curtains from the first floor of some rich couple’s mansion on Craigslist - beautiful, perfect condition, and probably worth $2000 new for $200 - because they clashed with her favorite house plant. I go to grocery stores and stock up on meats marked down by half because they’re about to expire. Put it in the freezer and it’ll keep for months. My wife has the nice car and I drive a beater. A second car doesn’t need to be impressive when your main car is. That’s just the tip of the iceberg of our thriftiness. If we didn’t live like that, we’d be the ones complaining about inflation. We have bougey friends that waste their money on new everything, and they’ll come over and compliment how nice our stuff is. It’s not hard to be thrifty.
you just about explained how i have lived my life , lol things dont need to be top shelf or high end . they just have to do what you want them too.
thing most are ignoring even in the article , is whats being discussed is what everyone would consider perishable items .
even though the article did touch on many of the things that do affect the costs such as drought , tthe pandemic shut downs and other things , they forgot to mention that the items discussed have a limited shelf life , as you mentioned .
last year at this time i bought a hog in wisconsin for 300 bucks , had it shipped here , for 75 , hog topped out at 400 pounds by the time i got it , about a month of grain feeding and it was time to hang it on the meat pole and get to work . went straight from farm to me to the freezer , no middle man or associated costs ., but not everyone has the capability or the place to do that , i understand that . Nor would they really want to once they get into it .
most peoples plan A is the supermarket , they never have a plan B or C or even a plan D.
Yesterday the supermarket price for a boneless pork loin roast was $2.68 a pound , i picked one up and when i got it home sliced it up into cutlets , which were going for over $4 a pound already sliced and packaged ....saved money AND i got to choose how thick the chops were .
Alittle off topic , but related to costs of food stuffs , Im waiting and watching whats going to happen in california , now that prop 12 is law , what that does is require pork producers to insure their hogs are raised "humanely". if the product is sold in california .problem is , the law went into effect jan 1st , with no way to enforce it and no penalties , and since according to one report 98% of the pork consumed in the state is from out of state , its a law that has no teeth anywhere else . its not like they can force a hog grower in another state to conform , nor can they cross the state line to check ......and with the prices now and the so called shortages nation wide , the growers can lose cali business and make it up somewhere else .
Yesterday the supermarket price for a boneless pork loin roast was $2.68 a pound , i picked one up and when i got it home sliced it up into cutlets , which were going for over $4 a pound already sliced and packaged ....saved money AND i got to choose how thick the chops were .
I do the same thing, but I’ll get the ones that are marinated and didn’t sell quick enough so they go BOGO. Slice into cutlets and they’re so good you’ll lick the plate clean for less than $1/serving. I’m going to draw the line at a live hog though, lol. I’m not made like that - someone else has to do that deed.
like i said , i totally understand that , it is NOT for everyone , Dad was a butcher that started with hanging beef and pork , did that job for over 50 years , he TRIED to get me to follow in his footsteps , but , it wasnt for me .
He did however teach me how to break down a carcass and get the cuts out , since im a hunter , i have used that skill set with the game animals i harvest and passed that skill to my kids ..
Now the funny thing? i currently have a small flock of hens . I just cant bring myself to kill them and butcher them up.....only thing i can attribute it to is i raised them from little fluff butted chicks , protected them and watched them grow ., all the rest i dont have that connection too, and i have no problem cutting up chickens that are already plucked that others bring me , so i will settle for the fresh eggs .
Of course this was never a problem before Biden. This is a pretty poor distraction attempt.