At a recent campaign rally in Raleigh, North Carolina, Kamala Harris made bold promises to address the rising cost of food, putting it at the heart of her campaign for the presidency. However, as Harris speaks of lowering food costs, the Biden/Harris administration is advancing a set of regulatory changes through the United States Department of Agriculture (USDA) that may produce unintended results.

This article follows Breeauna Sagdal’s in-depth analysis on this topic. As Breeauna pointed out, “While the administration’s rhetoric focuses on consumer relief, the reality is that these policies may pave the way for further consolidation and higher prices—precisely the opposite of what’s being promised”. With the USDA’s updates to the Packers and Stockyard Act, these concerns are becoming more pressing.

Background on the Packers and Stockyard Act

The Packers and Stockyard Act was first enacted in 1921 to curb the overwhelming control five major meatpacking companies had over the U.S. livestock market. At that time, these companies controlled 81% of the market, forcing Congress to act to protect competition.

Fast forward to today, four corporations—JBS, Tyson, Cargill, and National Beef—control 85% of the U.S. meatpacking industry. Despite the Act’s original purpose of breaking up monopolies, consolidation in the industry has only intensified, raising questions about how effectively current regulations serve the public interest.

Overview of the Proposed USDA Changes

The Biden/Harris administration’s changes to the Packers and Stockyard Act represent a significant shift from its original anti-trust purpose. Historically, the Act focused on preventing monopolistic practices and safeguarding competition. The USDA’s proposed updates would transform the Act into a broader consumer protection law.

The Redefinition of Harm: The USDA plans to expand the definition of “harm” under the Packers and Stockyard Act. Rather than focusing solely on direct harm to the market, the new rules would allow the Secretary of Agriculture to take preemptive action based on perceived future risks, even if no actual harm has occurred. This approach could create significant uncertainties for businesses operating within the meat industry.

Implications for the Industry: By broadening the criteria for regulatory action, the USDA could create an environment where routine business decisions come under scrutiny. Smaller and independent meat processors, in particular, would likely bear the brunt of increased compliance costs, as they lack the resources of larger corporations to absorb regulatory burdens.

Potential Consequences of the USDA’s Policy Shifts

Impact on Competition: While the USDA claims that these changes will foster competition and protect smaller processors, there is a real risk that the opposite will occur. As Breeauna Sagdal aptly observed, “The USDA’s track record shows that increased regulation often benefits the very corporations it claims to regulate, leaving smaller businesses to bear the brunt of the costs“. Larger corporations are better equipped to absorb regulatory costs, giving them a competitive edge over smaller players, potentially leading to further consolidation in the meatpacking industry.

Consumer Prices: One of the administration’s key objectives is to reduce food prices. However, the proposed regulations may have the opposite effect. As businesses incur additional compliance costs, those expenses are likely to be passed on to consumers in the form of higher prices at the grocery store. At a time when inflation is already driving up the cost of living, these regulations could exacerbate the situation rather than alleviate it.

Industry Reactions: The response from the industry has been predominantly negative, particularly from small to mid-sized processors. They argue that the proposed changes are overly burdensome and could stifle innovation. Some have also expressed concern that the regulations are too vague, making it difficult to know which practices might be deemed illegal under the new rules. As a result, the industry could see fewer new entrants and an even tighter grip on market control by the largest corporations.

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Conclusion

The USDA’s proposed changes to the Packers and Stockyard Act are intended to address the issue of concentration in the meatpacking industry. However, the unintended consequences could be far-reaching, including increased costs for small businesses, reduced competition, and higher prices for consumers. As the Biden/Harris administration moves forward with these regulatory updates, it is critical for both industry stakeholders and consumers to remain informed about the potential impact on food prices and market dynamics.

While campaign promises may focus on lowering costs, the reality of policy implementation often proves more complex. Unless the USDA reconsiders its approach, Americans may find themselves paying more at the grocery store and seeing fewer choices on the shelves.

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