While grocery prices are climbing at the fastest pace since 2008, beef, pork and poultry lead the way. Grocery prices are up 6.4%, part of a US inflation rate of 6.8% with meat prices up nearly 13% since last year at this time, according to the CPI. While prices were up on nearly every item in grocery stores, steaks rose around 25%, bacon 21% and chicken 9.2%.
A couple weeks back, we reported on a few reasons behind the price hike including record high demand, COVID outbreaks, labor issues and increased cost of business, while this week we are sharing another potential reason for the increases. According to the National Economic Council, four of the biggest meat processing companies are using their market power in the US to drive up meat prices and underpay the farmers.
According to their report, these companies have tripled their net profit margins since pre-pandemic and those statements showed a collective 120% jump in their gross profits and a 500% increase in net income. These companies recently announced $1 billion in new dividends and stock buybacks, on top of the more than $3 billion they paid to shareholders since the pandemic began. Their reasoning behind the increases is due to higher labor and supply costs. The North American Meat Institute says that the consumer demand for meat has never been higher, and processors are producing more meat than ever before under extraordinary circumstances, adding to the price hike.
According to the National Economic Councils statement, "If rising input costs were driving rising meat prices, those profit margins would be roughly flat, because higher prices would be offset by the higher costs.” The White House administration continues to express frustration over the meat industries rising prices.
While the biggest question in the industry remains “When will the meat market return to normal?” the answer is still unknown and unfortunately, predicted to remain tight for the unforeseeable future.