(Bloomberg) — Hamburger or a steak marked “Product of the USA” may contain beef from cattle raised as far away as Australia, a loose labeling practice that has grabbed President Joe Biden’s attention as he and anti-trust regulators set their sights on giant meatpacking conglomerates.
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The long-simmering fight over the label, which consumer advocates and ranchers consider misleading, evokes grievances among cattle producers over the lopsided market power of the four companies that control 85% of U.S. beef-processing.
Producers have been growing increasingly frustrated at the diminished share they receive of soaring grocery-store prices even as they grapple with drought and higher feed costs.
The issue, now under review by the U.S. Department of Agriculture, gives Biden a rare opportunity to make inroads with rural voters while also addressing progressive demands to check corporate power. Earlier this month, the president announced an initiative to counter the market power of the giant conglomerates that dominate meat and poultry processing.
It also raises questions about trustworthiness in labeling at a moment that consumers concerned about climate change and animal welfare are seeking greater transparency on the sources of their food and how it was raised. Merely repackaging imported meat is sufficient for a “Product of the USA” label, according to an Agriculture Department spokeswoman.
“We want to make sure that consumers understand precisely what that means,” Agriculture Secretary Tom Vilsack told lawmakers last week about the Product of the USA label. “So we’re in a process of doing a fairly extensive survey to find out if consumers understand what that means and whether they place value on it.”
Critics say current labeling rules undercut U.S. cattle producers’ bargaining power with meatpackers and make it harder for independent meat processors to differentiate U.S.-raised beef from competing products. Beef and pork can be sold as produced in the U.S., even if the livestock was born, raised and slaughtered elsewhere, as long as it undergoes any processing in America.
In a petition seeking changes in the labeling rules, one producer group included a photo of a plastic-wrapped T-bone steak featuring a large red, white and blue “Produced in the USA” sticker. Fine print on another part of the package disclosed the beef came from Uruguay.
The conflict over the label pits two powerful political interests against each other.
Meatpackers are among the largest employers in several states and cultivate strong relationships with key lawmakers. Beef cattle operations account for more than a third of U.S. farms and ranches, making it the single largest — and thus politically potent — segment in American agriculture.
Advocacy groups including the U.S. Cattlemen’s Association and R-Calf, which primarily represent smaller producers, and the American Grassfed Association, representing a niche product that commands premium prices but has lost market share to lower-cost imports, have argued for years the designation should only be allowed for beef from cattle born, raised and slaughtered in the U.S.
Representatives of the four major beef processing companies declined to comment on the labeling controversy. Their trade association, the North American Meat Institute, said it was waiting to see the outcome of the government’s review. They have repeatedly denied abusing their market power and blame labor shortages for higher meat prices.
Separating domestic and foreign livestock could raise costs for big packing companies, which have have consolidated operations in massive plants that can slaughter thousands of cattle or hogs a day. Their supply chains include Canadian and Mexican hogs and cattle, some of which spend time being fattened on U.S. feedlots.
Republican Senator Mike Rounds of South Dakota, whose state is home to more cattle than people, introduced legislation to restrict such labels to beef from cattle born, raised and slaughtered in the U.S.
“Our cattle producers bring it up every single time we get together,” Rounds said in an interview. “It is of utmost importance to them and a real source of frustration.”
Cattle producers are growing increasingly restive as the spread between the price packers pay for U.S. cattle and the price they receive for wholesale beef hit record levels last year.
Tyson Foods Inc., the biggest U.S. meat company by sales, said its beef segment has had a profit margin of 18% in fiscal 2021, its highest ever.
Plenty of ranchers think they know one reason they have lost pricing power: Congress voted in December 2015 to exempt beef and pork from mandatory country of origin labeling, which is still imposed on other meat, poultry, seafood and fresh produce.
Cattle prices “took a pretty significant dive after that program went away,” said Danni Beer, who co-owns a ranch with her husband in western South Dakota, where they confront drought conditions on top of stagnant cattle prices.
Meatpackers and stores could still promote beef to customers as home-country wholesome, if they wished. Only now those claims were governed by the looser Product of the USA standard.
Prices U.S. cattle producers received for their livestock plunged. Farmers received 51.5 cents of the retail price of beef in 2015. Last year that had dwindled to 36.8 cents, according to USDA.
Ted Schroeder, a Kansas State University agricultural economics professor who specializes in livestock markets, said other factors have been more important in holding down cattle prices. The size of the U.S. cattle herd, which had declined for years during a series of droughts and an outbreak of mad cow disease that temporarily closed off most export markets, began to rebuild in 2014, creating more supply. A series of slaughterhouse closures also reduced U.S. meat processing capacity, giving packers more pricing leverage, he said.
But loose labeling rules inevitably harm producers by diminishing the value they are trying to create with a product that comes from within the country, said the Rohit Chopra, a former Federal Trade Commission member who championed a stricter standard.
“They want to market a differentiated product,” Chopra said in an interview. “When there is blatant fraud on the labels, they can’t market a differentiated product.”
Will Harris, a 67-year-old fourth-generation farmer in Blufton, Georgia, who raises pasture-fed cattle, hogs, sheep, goats and poultry, believes the current standard undermines producers like him. He says grassfed beef appeals to customers not only for health reasons but the impact on the local environment.
“I believe that my customers are happy to see those goals accomplished in Australia, New Zealand and Uruguay,” Harris said. “But I believe they may want to first have it accomplished here in their own communities, or at least their own country.”
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