How Proposed Legislation Would Micromanage Beef Markets

In the 1930s, in response to the Great Depression, Congress enacted laws like the National Industrial Recovery Act and the Agricultural Adjustment Act to micromanage various markets.  With the benefit of hindsight, it is easy to see that these bills ultimately harmed consumers by fixing prices and harmed producers by preventing markets from adjusting naturally.

Why, then, is Congress again considering aggressive legislation to regulate beef markets?

In a rush to address soaring meat prices and ensure that all parts of the supply chain benefit from those prices, several pending bills would dramatically expand the federal government’s role in meat markets. In particular, the Meat and Poultry Special Investigator Act would create a new office within the Department of Agriculture (USDA) to police competition. And the Cattle Price Discovery and Transparency Act would give the USDA significant new authority to manage cattle sales around the country.

Unfortunately, both bills would harm consumers and reduce competition. Specifically, the special investigator bill would create a duplicative office within USDA to combat anticompetitive conduct, which could slow law enforcement investigations and lead to more politicized enforcement decisions.  Instead of creating a new office, Congress should simply ensure that the existing law enforcement agencies have the necessary tools and resources to do their jobs.  

Similarly, the cattle price bill would displace free market fundamentals with government-controlled pricing. In a nutshell, the bill would require cattle feeders to sell cattle to packers, and packers to buy from feeders a mandatory minimum of fed cattle on a cash, spot market. As a result, the bill would reduce the ability of all levels of the supply chain to negotiate freely through formula and contract sales, also known as alternative marketing arrangements—a system that has helped to increase consumer demand and improve beef quality by effectively transmitting market signals about consumers’ preferences to producers. 

In other words, the bill would replace a market structure that has evolved naturally over time with one created and managed by bureaucrats in Washington. When has that ever been a good idea?  Instead, Congress should let these post-COVID markets adjust naturally. Indeed, fed cattle prices reached a seven-year high earlier this year, benefitting suppliers up and down the chain, and these price signals ultimately will work to expand production and keep prices in check for consumers. 

Beyond their obvious flaws, these bills buy into the White House’s faulty narrative that beef markets are suffering from a lack of competition. In fact, total beef production reached record levels in 2020, and meat prices fell in the five years before the pandemic. Since 2007, the economy has become less concentrated; indeed, the four-firm concentration ratio in fed cattle beef packing has not changed meaningfully in more than 25 years.

The USDA itself recognizes that “[h]igh feed costs, increased demand, and changes in the supply chain have driven up prices for wholesale beef and dairy.” Former Treasury Secretary Lawrence Summers, a senior official in both the Clinton and Obama Administrations, has explained that macroeconomic trends are raising prices around the globe. Higher food prices are resulting from increased demand, COVID-related supply chain disruptions, and higher input costs, especially energy and labor. 

Rather than expand the government’s role in the economy, create new regulatory burdens, or hire new, duplicative regulators, Congress should explore other avenues to encourage competition and lower prices for consumers. Sensible policies would reduce tariffs, raise supplies of fossil fuels, encourage people to return to work, and relax economic harming regulations. In the near century since the New Deal, we have learned that all of these tools, along with sensible monetary policy, help markets operate more effectively and efficiently, to the benefit of consumers and producers alike.

About the authors

Sean Heather

Sean Heather is Senior Vice President for International Regulatory Affairs and Antitrust.

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