The Biden administration has decided to “solve” the complex problem of low cattle prices and high meat prices by spending $1 billion to subsidize the construction or expansion of small and medium-sized meat processing plants.
Building capacity is one thing, making it viable is another – particularly in states with overly burdensome tax and regulatory regimes. In that regard, California provides a prime example.
Last week, Smithfield Foods announced it would close its only California processing plant, a pork slaughter facility producing Farmer John products with 1,800 employees in Vernon. It is also looking at options to end its farming operations in the state.
The plant will close early next year.
Jim Monroe, vice president of corporate affairs, told The Associated Press that company operating costs in California are much higher than in other areas of the country, including taxes and the price of water, electricity and natural gas.
“Our utility costs in California are 3 1/2 times higher per head than our other locations where they do the same type of work,” he said.
The Wall Street Journal reported that the company also cited the state’s regulatory climate, particularly Proposition 12.
Officially the Farm Animal Confinement Act, Prop 12 bans the sale of eggs, pork and veal products in California unless production facilities meet animal-confinement standards dictated by the state. The law applies to products produced outside the state of California.
The law was passed overwhelmingly by California voters in 2018. It has been challenged in federal court by processors and producer organizations, and that case is awaiting review by the U.S. Supreme Court.
The administration’s push to increase capacity favors small- and medium-sized processors over the four major companies that dominate the meat processing industry. The idea is to create more competition for livestock and drive up producer prices while staving off potential bottlenecks in the supply chain.
On its face that makes sense. But, it isn’t as simple as it sounds.
Smithfield is one of the big players, with 40,000 employees and 46 facilities across the United States. The Vernon facility only processes hogs from company-owned farms, but still couldn’t realize the efficiencies it needs to operate in California.
If a big, vertically integrated operator can’t make a go of it in California, how will a smaller company buying hogs on the market be viable?
The feds can throw as much money at smaller companies as taxpayers will borrow, but that’s not going to help those processors become viable in the face of high cost and regulatory burdens imposed by some state governments.
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“The idea is to create more competition for livestock and drive up producer prices while staving off potential bottlenecks in the supply chain.”,,,,Joe has already driven up the price of livestock production with his insane driving up the prices of Diesel fuel used to plant, harvest and transport to market the hay fields that feed and grow the cattle. The same applies to the feed grain which I use to buy at 18c/ lb but now cost 26 cents and rising thanks to Joe. Grain to feed cattle is now competing with grain to feed people and produce ethanol for fuel, and the price of both bread and cattle which now are in more limited supply because the price of Diesel makes it uneconomical to raise grain and hay and still make a profit. With Putin bottle necking the Ukraine breadbasket of Europe the Europeans and North Africans will starve, because cheap production due to Joe’s energy mandates will limit what is produced this year, and Putin will horde the rest. America will be short themselves like thanks to Joe we are now short fuel, and unable to help the rest of the world with food as in energy. Putin and BIden crime families get rich, Americans get screwed. Thank you Joe Biden. Get in line behind the infants of America unable to get their formulas or we adults our steaks and bread. When the beer runs out it’s curtains for the Democrats.