U.S. pledges $500 million to increase meat processing capacity

By Tom Polansek

CHICAGO (Reuters) - The U.S. government will invest at least $500 million to expand beef, pork and poultry processing capacity, Agriculture Secretary Tom Vilsack said on Friday, after consumers faced limits on meat purchases during the COVID-19 pandemic last year.

The money from a $1.9 trillion pandemic relief package approved in March will be awarded to meat processors in grants and loans to make the supply chain more resilient and increase competition in the sector, Vilsack said at a news conference in Council Bluffs, Iowa.

President Joe Biden signed a sweeping executive order that pushes the U.S. Department of Agriculture to crack down on "abusive practices of some meat processors" and promote more competition in the U.S. economy.

Cattle ranchers say there are too few processing companies that buy livestock to turn into beef, sometimes forcing farmers to accept the one and only bid they receive for animals.

Ranchers are now selling cattle for a loss even though meat companies make profits selling beef to consumers, Vilsack said.

"It seems to me in fairness profit ought to go both ways," he added.

The meatpacking sector came under increased scrutiny after slaughterhouses closed temporarily during the start of the COVID-19 pandemic as workers fell sick.

When large meat plants close, meat supplies tighten while ranchers get stuck with cattle that would otherwise have been slaughtered. That means the price of cattle generally falls, while the price of meat in supermarkets rises.

A cyberattack against the North American arm of Brazilian meatpacker JBS SA (OTC:JBSAY) that shut U.S. beef plants last month highlighted concerns about concentration in the sector.

Biden's order directs USDA to consider new rules to make it easier for farmers to bring and win legal claims against big processors.

The USDA said in June it would pursue three rules to strengthen enforcement of the Packers and Stockyards Act, passed 100 years ago to protect farmers from unfair trade practices.

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The North American Meat Institute, which represents meat companies, said on Friday that Biden's order will "open the floodgates for litigation."

"Government intervention in the market will increase the cost of food for consumers at a time when many are still suffering from the economic consequences of the pandemic," said Meat Institute President Julie Anna Potts.