The grocery store is arguably where consumers are feeling inflation the most. According to the Bureau of Labor Statistics, meat costs about 20% more than in 2021, and analysts expect prices to continue to rise before falling.
That’s great news for meat processors like Tyson Foods, which told shareholders on Wednesday that it posted double-digit increases in profit and sales last quarter and that its earnings exploitation had increased by 40%.
Tyson is one of the so-called big meat processing companies, which controls about 80% of meat production in the United States.
But isn’t Tyson feeling the effects of supply chain disruptions and inflation? And what about those breeders who produce the cows or the people who buy them at the grocery store?
A few miles from the Tyson Foods headquarters in Springdale, Arkansas, you’ll find Wright’s BBQ, owned and operated by Jordan Wright.
He said business is good, but he’ll likely have to raise his prices soon because of what he’s paying for the raw product.
“You know, when the price of ribs goes from $1.50 to $2.05 a pound, you know, that’s a real margin that you then have to add to your menu and make sure you don’t lose,” said Wright.
He said he didn’t feel guilty passing that on to the consumer.
“A cost to me that you cannot control? You know, it’s not really you who sticks to the customer.
Wright knows how meat pricing works better than most — he used to work at Tyson and understands why it’s costing him more.
But Stéphanie Mercier does not have as many. The Farm Journal Foundation’s senior policy adviser said that at shareholder meetings of major meatpackers, they talk about consumer inflation expectations.
“And they were basically acknowledging in those conversations that they were taking advantage of the general inflationary environment to boost their earnings,” she said.
Consolidation has led to great pricing power among the so-called Big Four, which includes Cargill, JBS and National Beef Packing.
“I think the evidence suggests that they have taken advantage of the disruption to the economy in general due to the pandemic to take advantage of it, to use this market power to increase our prices and reduce what they pay to farmers” , said Mercier.
There is a definite supply chain that gets the meat to the grocery store, and there is currently a bottleneck in the meatpacking plants. That’s another reason farmers don’t benefit from you paying higher prices, said Minnesota agribusiness attorney Jeffrey Peterson.
“We don’t have the capacity to kill more cattle, and so the demand from the herder side is not the same, and so that creates a disconnect,” he said.
Peterson added that President Joe Biden’s administration has looked into the meatpacking industry’s pricing practices to try to resolve this disconnect.
Tyson did not respond to Marketplace‘s request for comment before airtime. But economists like Lee Schulz of Iowa State University warn against relying too much on a quarter of the data to tell us why Tyson’s earnings are up.
“These cost increases don’t necessarily happen instantly, do they? And so looking at a snapshot in time can certainly obscure the bigger picture,” Schulz said.
And, he said, retail prices adjust faster up than down. So even if margins normalize, you might not see it in store right away.