COVID-19, Beef Price Spreads, and Market Power

Abstract

Key words: meatpacking, plant shutdown, oligopoly, oligopsony (ProQuest: ... denotes formulae omitted.) Introduction The unprecedented spike in beef price spreads (Figure 1) and drop in cattle slaughter (Figure 2), as beef-packing plants closed or slowed production because of COVID-19 (Dyal, 2020;Taylor, Boulos, and Almond, 2020) prompted calls for investigations into "inappropriate influence" during the pandemic by the highly concentrated packers in the beef market (National Cattlemen's Beef Association, 2020;R-Calf, 2020;Grassley, 2020). The extent to which packer concentration and market power are believed to have triggered or exacerbated the widening of the beef price spread during the pandemic is revealed in a series of letters from cattle producer groups to lawmakers and lawmakers to government agencies. On April 29, 2020, R-Calf (2020) wrote to President Trump and congressional leaders stating that packer concentration "stymies producers' market access and robust competition for cattle... [and] also transfers any marketing power America's cattle farmers and ranchers might possess to the highly concentrated beef packing industry." On July 22, 2020, 5 months into the pandemic, the USDA released the Boxed Beef & Fed Cattle Price Spread Investigation Report, which summarized, in addition to the market impacts of the Tyson fire on beef price spreads, the market impacts of the COVID-19 pandemic (U.S. Department of Agriculture, 2020a).