The chief executives of the big four meat processors in the US - JBS, Tyson, Cargill and National Beef - appeared before the US Senate agriculture committee this week.
Between them, they control 74% of US beef processing capacity and have been blamed by the Biden administration of abusing their position and causing inflation where meat price increases are running at twice the level of the national average.
Unsurprisingly, that isn’t accepted by the processors.
Tyson CEO Donnie King released his submission ahead of the hearing. In it, he said that Tyson doesn't set the prices at which they buy cattle or sell to their customers, these are set by the rules of supply and demand.
He pointed out that COVID-19 had caused a severe labour shortage, which meant it struggled to process cattle at the same time consumer demand was driving the end price.
He also referred to the effect of what he described as geopolitical issues, namely that feed, energy and transport costs have all increased dramatically over the past year.
Tyson’s CEO also rejected the view that industry consolidation was anything to do with prices.
He said that the concentration in the beef processing industry has remained virtually unchanged over the past 50 years and in many of those years, ranchers made historic profits while factories either lost money or broke even.
Whatever the merits in Tyson’s argument about supply and demand, there is no denying that the meat-processing industry in the US enjoyed exceptional profits in 2021.
For Tyson, whose financial year starts in October, its first quarter (the final quarter of 2021) saw it record an increase in beef sales of $5bn (€4.4bn), a massive 31% increase on the corresponding period the previous year.
This was despite a 6.2% drop in the volume processed.
Operating margin also increased to $956m (€839m) or 19.1%, compared with $528m (€463m) in the same period the previous year.
It also revised the full-year outlook for operating margin up from 9% to 11%.
It is always difficult to establish if a company or industry is abusing its dominant position.
There is no doubt when an industry is dominated by a large player or players, it is difficult if not impossible for new entrants to break through.
Google dominates internet search engines, Facebook acquired WhatsApp which was a growing competitor and, as a result, it now dominates that corner of social media.
The US administration has pointed the finger of blame on large meat processors and has put in place a large fund to assist small independent companies to develop in order to compete.
The main players reject the analysis and point to the huge stimulus package as the key cause of inflation, plus energy and fuel costs.
Meat processing is a low-margin business with huge profits driven by high volumes.
While factories in the US had exceptional performance over the past year, it is unlikely that new entrants or existing smaller companies will expand to dilute their share of the industry anytime soon.