Smaller meatpacking businesses struggle to compete with mega processors, USDA grants aren't enough

Greg Gunthorp at his small meat packing operation in
Indiana. (Photo by Chelsi Daley, Investigate Midwest)

Mega meatpackers dominate so much of the market that smaller meat processors are forced to seek contracts and business beyond grocery stores. "Even with $1 billion in federal grants available to them, many still struggle to compete" with slaughterhouse giants Tyson Foods, JBS, Smithfield and Marfrig, reports John McCracken of Investigate Midwest. "The Biden administration has tried to address the concentration, including offering grants to help small processors expand. But it's not enough for many small processors that face proportionately higher operating expenses than the industry giants, according to interviews with small processors and experts."

Greg Gunthorp operates a small meat processing plant in northern Indiana. Over the past 20 years, he has sold niche meats "to chic Chicago and Indianapolis restaurants and to Chicago O'Hare International Airport. He also sold direct to consumers," McCracken reports. "But selling in grocery stores was not an option, as the largest meatpackers often have those contracts. In his circumstances, he found it difficult to compete in the chicken industry, and he recently stopped raising and slaughtering the bird." He told McCracken, "In an extremely concentrated marketplace, it's difficult for a small processor — especially a plant that slaughters — to find a sweet spot somewhere to fit long term."

"When asked about the problems small processors identified, the Department of Agriculture responded that the $1 billion in grants it's invested in expanding small processors 'is a historic investment that will directly combat consolidation in the meat processing sector and help build resiliency in the face of market disruptions,'" McCracken writes. "Just 12 federally inspected plants produced slightly less than half of the country's beef supply in 2022, according to Investigate Midwest's analysis of USDA data. The same year, 14 plants produced about 60% of the nation's pork."

Giant meatpacking companies save money through scale, owning their animals and "contracts with retailers, ensuring their product ends up at grocery stores," McCracken reports. Bill Bullard, the CEO of R-CALF USA, which advocates for independent cattle producers, told McCracken, "They've exceeded any efficiencies associated with economies of scale and are now engaged in controlling the marketplace."

"The funding is a promising sign in addressing the industry's concentration, said Peter Carstensen, a professor of law emeritus at the University of Wisconsin and an antitrust law expert," McCracken writes. "But the administration should also be using its antitrust enforcement capabilities more than it is, he said."