Meat Competition Plan Gets A Solid Meh

There was little excitement in the country this week from news the Biden Administration has an “action plan for a fair, more competitive and more resilient meat and poultry supply chain.”

Many wanted more facts, but this is so new and yet so warmed over that details are lacking, a market analyst said.  The “plan” is new but consists mostly of goals, which is typical of plans from the government to improve something.

And, much of the rhetoric has been heard so many times over the last 30 years or so, that many are skeptical that anything of substance will change this time.  Even some groups that have harped on the issues presented in President Biden’s plan seemed underwhelmed.

 

LACK OF COMPETITION

 

“In July President Biden signed an Executive Order on Promoting Competition in the American Economy to create a fairer, more resilient, and more dynamic economy,” a White House release said.

The introduction of that release cited the meat and poultry processing industries as “a textbook example” of a market segment that is “dominated by a handful of large companies that control most of the business and most of the opportunities—raising prices and decreasing options for American families, while also squeezing out small businesses and entrepreneurs.”

 

SOME SPECIFICS

 

The President wants to spend $375 million to “jump start” independent processing projects to increase competition.  Phase I of this is to come this spring, investing $150 million to “jump start” an estimated 15 projects.

The plan calls for a bias toward projects with the greatest near-term effect.

Another $225 million is designated to support more projects in phase II this summer.  The aim will be to make sure these funds “truly expand capacity outside the largest meat and poultry processors, funding only independent operations.

But just how far that will go is a question.  AgriPulse reported in July when Agriculture Secretary said he wanted to spend $500 million to expand beef packing plant capacity that Kansas State University Agricultural Economist Glynn Tonsor said a rule-of-thumb when considering a new plant is $100,000 per head of processing capacity.

“So, $500 million doesn’t go nearly as far as it sounds,” Tonsor was quoted as saying.

Biden’s plan targets $275 million to partner with lenders that will provide loans and other support to businesses at rates and terms that increase access to long-term, affordable capital.

In what may be a helpful part of the plan, the plan proposes to provide $100 million in reduced overtime inspection costs for small processing plants, which could give farmers and ranchers local processing alternatives.

 

CATTLE, BEEF RECAP

 

The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $139.22 to $143.25 per cwt, compared with last week’s range of $135.28 to $137.27.  FOB dressed steers and heifers went for $212.57 to $218.25 per cwt, versus $211.86 to $215.04.

The USDA choice cutout Wednesday was up $0.11 per cwt at $266.93, while select was up $0.38 at $259.61.  The choice/select spread narrowed to $7.32 from $7.59 with 122 loads of fabricated product and 34 loads of trimmings and grinds sold into the spot market.

The USDA reported Wednesday that basis bids for corn from livestock feeding operations in the Southern Plains were up $0.10 to $0.20 at $1.45 to $1.65 a bushel over the Mar futures and for southwest Kansas were unchanged at $0.35 over Mar, which settled at $6.02 1/4 a bushel, down $0.07 1/4.

The CME Feeder Cattle Index for the seven days ended Tuesday was $162.13 per cwt down $0.22.  This compares with Wednesday’s Jan contract settlement of $162.12 per cwt, down $0.55.