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).