◼ REMARKS Bloomberg Businessweek
a long-standing campaign for permission to speed up Trouble Ahead at the Butcher
production lines. Between March 31 and April 17, the USDA
granted waivers allowing 16 poultry plants to operate at 175
birds per minute, up from 140, contingent on having enough
workers to operate them. “It’s just absolutely astonishing to
me that they’re having a hard time keeping plants open, yet
they’re approving line speedups,” says Tony Corbo, a senior
government-affairs representative for Food & Water Watch.
Corbo says speedups increase the risk that workers will lose
fingers, and that diseased animals will get past inspectors.
It’s not just advocates for workers and food safety who
are angry at the meatpackers. It’s farmers and ranchers. On
April 8 the National Cattlemen’s Beef Association wrote to
Trump asking for an expanded investigation into the “strik-
ing disparity” between the low prices paid for cattle and
hogs and the high prices packers receive for their output.
The USDA had been investigating price disparities following
a fire at a large packing plant last August in Holcomb, Kan.,
knocked out 6% of U.S. cattle-processing capacity, lowering
demand for cattle. It’s since added the Covid-19 shutdowns
to its investigation.
The pandemic has knocked out much more processing
capacity than the Holcomb fire, with a commensurately big-
ger impact on prices. HedgersEdge LLC, a risk-management
and market-research firm in Greenwood Village, Colo., cal-
8 culates a profit margin for beef and pork packers based on
the difference between their inputs (animals) and outputs
(cuts of meat). Since 2014 the profit margin for beef has aver-
aged $74 a head. On April 27 it reached $726, a record. The
increase for pork is smaller, from an average of $24 a head
to a recent level of $76 a head. Andy Gottschalk, the owner
of HedgersEdge, says the indexes overstate the profits that
packing plants can make because they’re based on the latest
spot prices, whereas four-fifths of the sales volume is based
on contracts that were set when prices were much lower.
Plus, he says, the companies still have big fixed carrying
costs for plants that are closed or operating below capacity.
But that doesn’t assuage the cattle ranchers and hog
farmers. Republican senators who have clout in Washington
have added their voices to the call for a probe by the USDA,
including Steve Daines of Montana, Deb Fischer of Nebraska,
Chuck Grassley of Iowa, Mike Rounds of South Dakota, and
Kevin Cramer and John Hoeven of North Dakota.
The plant shutdowns and political backlash haven’t done
much harm to processors’ stock prices. As the coronavirus
spread, Tyson’s shares plunged along with the overall stock
market; investors were worried about the closure of restau-
rants and other food-service establishments that were major
customers. But even with plants shutting down, Tyson’s
stock has rebounded 42% from its March low—not what
you’d expect of a company fighting a lung disease that’s
spreading through its workforce. Hormel is up 17% from its
March low; Pilgrim’s Pride, 37%; and Conagra, 43%.
The industry has become dominated by a handful of giant
companies, led by Tyson, the largest meat processor in North
May 4, 2020
Change in price since Dec. 31, 2019 60%
Beef spot price Live cattle futures
30
0
–30
12/31/19 4/28/20
DATA: COMPILED BY BLOOMBERG
America. The top four companies in beef control 80% of the
nation’s beef supply; the biggest four in pork control 60%
of the pork supply; and the largest five in chicken control
60% of the chicken supply. For efficiency the companies have
concentrated production in large plants that run multiple
shifts, in some cases around the clock. The plants tend to be
in rural areas where workers have few other employment
options. The sheer size of the facilities makes them vulnera-
ble to viral outbreaks, simply because there are more people
to infect in a big operation than in a small one. The closure of
just a few plants can have a significant effect on the nation’s
food supply. Hence Trump’s executive order.
Conditions for workers in Big Meat have improved some-
what in recent years, thanks to outside pressure and the low
national unemployment rate, which has forced employers
to treat employees better to keep them from taking other
jobs. Companies were shamed out of practices such as deny-
ing bathroom breaks, which had led some workers to wear
diapers on the job, says Celeste Monforton, a lecturer in
public health at Texas State University. Tyson has raised
wages and is helping workers get their high school equiv-
alency diplomas and citizenship. In Schuyler, Neb., Cargill
Inc. is working with the governor’s office to secure funding
for affordable housing. In other areas, it’s set up local clin-
ics to provide free medical services.
But working in a meat-processing plant remains gruel-
ing and hazardous. And now, with Covid-19, it’s downright
scary. “Inevitably, these large businesses create the breeding
grounds for disease,” Representative Mark Pocan, a Democrat
from Wisconsin, wrote in an April 29 statement to Bloomberg
Businessweek. He’s the lead House sponsor of a bill calling for
a moratorium on mergers in food and agriculture. Senator
Cory Booker, the New Jersey Democrat who ran for presi-
dent this year, is his counterpart in the Senate. Wrote Pocan:
“Monopolies will always expose their weaknesses in times of
crisis, and we’re seeing it in every industry.”
Covid-19’s rampage through the meat-processing indus-
try—spreading disease in rural America while wreaking havoc
on the meat supply—reminds us of a fundamental truth: How
we treat the most vulnerable sooner or later affects the rest
of us. <BW> �With Michael Hirtzer and Deena Shanker