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Beef prices soar, food giants suspected of manipulation?

The U.S. demands an investigation!

At least 20 countries issue export bans as global food crisis looms

  Recently, global food prices and the risk of food crisis have received attention from all parties.

In addition to the rising prices of agricultural products, the rapid rise in the price of meat products has also attracted the attention of some countries.

  According to foreign media reports, inflation in the United States is currently at a high level. As of April this year, the prices of beef and chicken have risen by more than 14% and 16% respectively in the past year.

On May 19, local time in the United States, U.S. senators proposed a bipartisan resolution requiring the Federal Trade Commission (FTC) to investigate whether large meat producers such as Tyson Foods may have manipulated prices.

Critics have blamed some of the rise in beef prices on the fact that U.S. beef production is controlled by only four major companies.

  In addition to beef, chicken prices are also rising rapidly in many countries around the world, and the U.S. Department of Justice has previously investigated price manipulation in the chicken processing industry.

  Affected by the situation in Russia and Ukraine, the global food crisis began to emerge, and many countries issued export bans.

As of the latest data on May 20, 20 countries have restricted exports of staple grains and crops, including Argentina, Algeria, Iran, India, Kazakhstan, Turkey, Serbia, Tunisia and Kuwait.

Food giants manipulate beef prices?

U.S. senators demand FTC investigation

  According to foreign media reports, US local time on Thursday (May 19), US Senators Elizabeth Warren (Elizabeth Warren) and Mike Hartz (Mike Rounds) proposed a bipartisan resolution to ask the Federal Trade Commission (FTC) Investigating Large Meat Producers for Possible Price Manipulation.

  It's the latest move by U.S. politicians to hold meat companies accountable for persistently high food prices.

It is reported that since the outbreak of the new crown epidemic, the level of inflation in the United States has remained high, and the Biden administration has conducted a review of the meat processing industry.

Critics attribute part of the blame to the fact that U.S. beef production is controlled by only four major companies.

  The latest data from the Bureau of Labor Statistics shows that from April 2021 to April 2022, the price of beef and veal increased by 14.3%, outpacing the increase of 13.7% for pork.

It is worth mentioning that the increase in the price of chicken is also notable, with the price of chicken rising by 16.4% in the past year.

  In 2018, four companies slaughtered about 85 percent of U.S. grain-finishing cattle, which are turned into steaks, roasts and other cuts of meat for consumers, according to the latest data from the U.S. Department of Agriculture (USDA).

The four processors are: Cargill, Tyson Foods Inc, Brazil-based JBS SA and National Beef Packing Co.

According to Reuters, the companies have previously denied that the joint push up prices.

  The senators cited a 1914 act that authorized the U.S. president or Congress to direct an FTC investigation into alleged violations of antitrust law.

However, the act has not been used since the 1920s.

  Angela Huffman, co-founder and vice president of Farm Action, an industry group that backed the resolution, said Congress should use all possible means to stop abusive monopolies.

He also said: "We are very pleased to see a bipartisan team that is going back in history and regaining this tool. The downside is that there is still a long way to go to make changes."

20 countries issue food export bans

  In fact, under the influence of multiple factors such as the continuation of the Russian-Ukrainian conflict and climate change, food protectionism has emerged in many countries around the world.

According to a real-time tracker developed by the International Food Policy Research Institute, the list of countries banned from food exports has grown in the months since the start of the Russian-Ukrainian conflict.

  As of the latest data on May 20, 20 countries have restricted exports of staple grains and crops, including Argentina, Algeria, Iran, India, Kazakhstan, Turkey, Serbia, Tunisia and Kuwait.

  The restricted food types also range from staple foods such as corn, flour, rye, and barley, to soybeans, animal oils, vegetable oils, salt, sugar, etc., to vegetables such as potatoes, eggplants, tomatoes, and onions.

Meat is also on the list of restrictions, such as Kuwait restricting the export of chicken and Turkey restricting the export of beef and mutton.

Food export bans still in place by countries (Data source: International Food Policy Research Institute, data updated on May 20, 2022)

  Among them, the one that most attracts market attention is that India recently banned wheat from going abroad. You must know that India is the world's second largest wheat producer.

  On May 13, local time, the Indian government issued an order to reduce production due to high temperature. In order to ensure its domestic food security, it announced an immediate ban on wheat exports.

The Directorate General of Foreign Trade of India issued a notice on the same day, expressing the immediate implementation of the wheat export ban.

However, countries that request and obtain authorization from the Indian government will be able to continue to receive wheat exports from India.

  According to local media reports, India has recently suffered a severe heat wave and a sharp rise in the price of domestic food, especially grains, and officials hope to stabilize food prices by banning wheat exports.

In addition, India expects a sharp reduction in domestic wheat production.

It is reported that India is currently the world's second largest wheat producer.

Global buyers are pinning their hopes on India for supplies after the conflict between Russia and Ukraine caused wheat exports from the Black Sea region to plummet, Reuters reported.

  It is worth mentioning that Indonesia's palm oil export ban not long ago "provoked public anger". Under the protests and demonstrations that broke out in many provinces and cities in the country, Indonesian President Joko Widodo said on Thursday (May 19) that with the country The domestic edible oil supply situation has improved, and Indonesia will lift its palm oil export ban from May 23 (next Monday).

  U.S. investigates rising chicken prices

  Previously, the U.S. Department of Justice had launched an investigation into price-fixing in the chicken processing industry.

  The U.S. Department of Justice has launched a years-long federal investigation into the chicken market over suspicions that large chicken producers such as Tyson Foods are manipulating market prices, culminating in criminal charges against employees of the companies.

  Between October and December 2021, the U.S. District Court in Denver conducted a seven-week trial of ten current and former executives at Tyson Foods, Pilgrim's Pride and Perdue Farms who were arrested, according to public reports. Allegations of price-fixing and bid-fixing in the vast U.S. poultry market.

On December 16 last year, the U.S. District Court in Denver declared that the trial against executives of Tyson Foods and other companies was invalid because the jury failed to make a timely verdict.

  It is worth mentioning that although the existence of price manipulation remains to be investigated, many meat giants in the United States do benefit a lot from rising food prices.

  Take Tyson Foods, the largest producer of processed chicken and beef in the United States.

It is also a large producer of processed pork and protein products, with brands including Jimmy Dean, Hillshire Farm, Ball Park, Sara Lee, Aidells, State Fair and Raised & Rooted, among others.

In fiscal 2021, 81% of Tyson's products are sold through various U.S. channels, including retailers (47%), food service (32%) and other packaged food and industrial companies (10%).

Additionally, 11% of the company's revenue comes from exports to Canada, Mexico, Brazil, Europe, China and Japan.

  Tyson Foods’ financial report released last week showed that its adjusted earnings per share in the second fiscal quarter of 2022 were $2.29, compared with $1.3 in the same period last year; net profit was $833 million, compared with $477 million in the same period last year.

  Various products of Tyson Foods have seen rises to varying degrees. The average price of beef in the second fiscal quarter rose by 23.8% year-on-year, and the average price of chicken and pork rose by 14.4% and 10.8% year-on-year, respectively.

Tyson also expects total sales in fiscal 2022 to be between $52 billion and $54 billion as inflationary pressures continue into the second half.

  As of the close on May 19, Tyson Foods’ stock price was reported at $84.12, with a total market value of $30.4 billion.

  Global chicken prices rise

  It is worth mentioning that in addition to the United States, the United Kingdom, South Korea, South Africa, Thailand and other places have recently exposed news of rising chicken prices.

  On March 8 this year, the Agricultural Economics Office of the Ministry of Agriculture of Thailand released a report saying that since 2015, the prices of three important agricultural products - pork, chicken and eggs have continued to rise, and the current price has hit a new high in eight years.

Compared with 2015, pork, egg and chicken prices have increased by 46%, 12% and 6% respectively.

The main reason was that the prices of feed raw materials such as corn, wheat and soybean meal continued to rise, up 14%, 43% and 15% year-on-year respectively.

  The research report of Zhongtai Securities on May 16 pointed out that since November last year, there have been outbreaks of highly pathogenic avian influenza in many farms in France.

Two poultry farms in Hokkaido, Japan have also experienced highly pathogenic avian influenza outbreaks.

According to data from the US Centers for Disease Control and Prevention, from January 2022, the United States has also found highly pathogenic avian influenza in waterfowl, broilers and other birds. state, infecting more than 37 million birds.

Currently in the migratory period of migratory birds in the Americas, some experts believe that bird flu will continue to spread in the United States.

The outbreak is the worst since 2015, according to the U.S. Department of Agriculture.

  Zhongtai Securities believes that international bird flu exacerbates domestic supply risks, especially upstream seed supply.

At present, under the avian flu epidemic in the United States, the price of poultry products has risen to varying degrees.

As one of the largest chicken producers in the world, the price of chicken in the United States has guiding significance for global prices. We have seen that historically, the price of broiler chickens in the United States has been consistent with that of Chinese broiler chickens. At present, there is a certain divergence, and the divergence between the two prices is bound to need to be repaired.

  In addition to meat prices, global food security issues have recently attracted attention from all walks of life.

  According to a research report by Yi Bin of Western Securities on May 18, the world is experiencing a new round of food crisis due to the impact of three major factors: economic shock, extreme weather and geopolitics.

The current number of hungry people in the world hit a new high, the war between Russia and Ukraine, and the announcement of a wheat export ban by India, a major wheat producer, in May, the "food crisis", the gray rhinoceros, is gradually approaching.

  According to its analysis, since 2019, global food prices have remained high, and the risk of a global food crisis is rising.

On the surface, there are factors such as the epidemic, geographical conflicts, slow global spring planting, high fertilizer costs, and a new round of trade restrictions; but at a deeper level, under the background of the epidemic and trade conflicts, the global value chain and supply chain are affected by non-economic factors. The severe shock of the factors and the increased uncertainty in the global food supply have exacerbated price increases.

  7 suppliers join forces to raise chicken prices to make 1 trillion won

  It is worth mentioning that South Korea has also investigated the rising price of raw chicken, and finally found that seven suppliers joined hands to fry up the price of chicken and made a profit of up to 1 trillion won (about 5.4 billion yuan).

  In South Korea, chicken is one of the main consumption meats. Whether it is ginseng chicken soup or fried chicken, they are the representative delicacies of South Korea. Naturally, the price of chicken has also attracted a lot of attention.

  According to CCTV Finance’s previous report, in October 2021, the South Korean government’s market supervision agency, the Fair Trade Commission, announced that seven chicken suppliers, which account for 93.2% of South Korea’s national market share, have jointly manipulated ginseng chicken soup dishes for many times in the past six years. The price of some varieties of raw chickens has reached 1 trillion won (about 5.4 billion yuan) during this period.

  After investigation, from 2011 to 2017, due to the oversupply of chicken in the market at that time, the price dropped. In order to avoid losses, the seven companies involved began to collude with each other to raise the wholesale price of chicken in the market many times.

  Even the Korea Broiler Association has been exposed to manipulating broiler prices.

  In April 2022, the Fair Trade Commission, a South Korean market regulator, disclosed that the Korea Broiler Association had artificially controlled the production of broilers for more than nine years to drive up sales prices.

Therefore, a fine of more than 1.2 billion won, or about 6.22 million yuan, was issued to him.

  It is reported that in order to prevent chicken prices from falling, the association acts as a communication link between members, assisting them to intervene in production from the upstream breeding chicken import stage.

The intermediate link also freezes fresh chicken to reduce the output, and limits production by discarding eggs and culling more than 28 million healthy chicks.

Manipulative acts like this were performed up to 40 times before and after.

Broker China Cloud Zhongyue

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