Would another “government cheese” type program work today for meat?

Hearken back about 2 years, or thereabouts, when the COVID pandemic was descending into its deepest throes in our nation, when news came out of South Dakota that employees at a meat processing plant there in Sioux Falls began to suffer rampant infection with the viral disease. 

 

Around March 25, 2020, the first news of an infected employee was shared with the Argus Leader’s FaceBook-based tip page when an anonymous tip was sent that an unnamed employee had tested positive for the disease. They published the story online the next day at 0735 with the straight-forward headline “Smithfield Foods employee tests positive for coronavirus.” (see: https://www.argusleader.com/story/news/2020/03/26/smithfield-foods-employee-tests-positive-coronavirus/2914475001/) 

 

The Chinese-owned Smithfield Foods, though a company spokesperson, Keira Lombardo, Executive Vice President for Corporate Affairs, had confirmed to the to the paper the veracity of that claim, and asserted that the unnamed employee was being quarantined for 14 days, with pay, at their residence, and would not be permitted to return to work until given medical clearance to do so. The exceeding majority of employees there were immigrants, and refugees from all over the world – including Congo, El Salvador, Ethiopia, Myanmar, and Nepal, with over 80 different languages spoken in the plant – most of whom did not speak English, and rumors had been circulating of other employees who had earlier fallen ill and were hospitalized with a mysterious disease. 

Chinese-owned Smithfield Foods pork processing facility in Sioux Falls, SD, where the American COVID-19 pandemic first began to escalate among immigrant & refugee employees characterized as “front-line” workers. A company spokesperson said a majority of meat they export to China are so-called “underutilized” products that are allegedly not consumed in the U.S.

 

In the 3-week period that followed, positive cases of coronavirus among plant employees rapidly escalated from 80, to 190, then to 238. And by April 12, with 644 confirmed cases, the number of infected individuals at the plant accounted for about 55% of all cases statewide, with a per capita concentration of 182.25 per 100,000 — far exceeding those of more populous neighboring states, greater even than Chicago, and Seattle — while Sioux Falls’ population was a little over 192,000. Ultimately, the number of positive cases continued skyrocketing, and eventually had at least 761 positive employees.

 

After the 1st confirmed death, and under mounting pressure from Republican Governor Kristi Noem, and Sioux Falls Mayor Paul TenHaken, both who wanted the plant to close for 2 weeks, officials at the plant announced that it would close, and on April 15 closed… for 3 days. Later, the company announced that the plant would stay closed “indefinitely,” and on May 5, partially reopened with 250 employees in 2 departments, including night clean-up crew, though primary production was ceased for about a month.

 

The plant’s closure didn’t just affect employees’ pocketbooks, nor put a mere scratch on the Chinese-owned Smithfield Foods’ revenues and profits. It revealed flaws in the to-date recklessly free-wheeling American system of enterprise, and how much harm had been done to it by allowing the concentration of such facilities among a few competitors — a condition known in the economic community as oligopoly, when there are very few competitors (often but a handful, or less), who can, and often do, control (manipulate) prices. 

 

More specifically, there was a ripple effect that harmed farmers, and ultimately, consumers, because companies have a weight/size limit on the hogs they slaughter and process, which, according to the the South Dakota Pork Producers Council, is under, at, or around 280-300 pounds, or thereabouts. The big name processors claim that hogs over that size & weight can’t be accommodated on their processing lines, because their automated machinery and lines cannot handle greater weights and sizes. And that single plant in Sioux Falls, processes between 4, to 5% of the total volume of pork sold and consumed in the United States.

President Reagan ordered that the surplus of cheese be held in federal storage in warehouses across the country and given to needy Americans. Here the cartons are seen in an underground storage warehouse near Kansas City. (Credit: Bettmann Archive/Getty Images)

 

In March 2020, the United States Department of Agriculture found that a record-setting 1.75 million hogs were processed in South Dakota, alone. From birth, to slaughter, it only takes about 5, or 6 months to produce a market-ready hog, and during the final days of their production, hogs gain on average 20-30 pounds weekly, which means they’re rapidly gaining weight, and must be shipped out as quickly as possible to make room for the next farrow, and not exceed the size/weight limits imposed by the processors. Farmers simply don’t have room to “store” hogs as they grow into much larger sizes, some of which reached 350 pounds, or greater.

 

Consequently, news reports of farmers euthanizing their herds became almost commonplace, because the 20,000 hogs daily purchased by and slaughtered at Chinese-owned Smithfield’s Sioux Falls operation, the 9th largest in the nation, had nowhere to go. Amidst that, a very peculiar phenomenon began to emerge among livestock farmers: On-the-hoof prices for cattle, sheep, pork, and other livestock meat animals plummeted, while in-store finished product prices skyrocketed for consumers.

 

Farmers, attempting to minimize losses, and earn some revenue from their herds, turned to lesser-known, small, family-owned local and regional meat processors in South Dakota and surrounding areas, which all began to experience a sudden surge in business, with some facilities reported being booked up for “locker” dates — referring to the date when an animal is accepted for slaughter & processing — well into 2022, because consumers were panic purchasing and stocking their freezers. To meet the need, Governor Kristi Noem proposed assisting small meat processors in the state with $5M in state grants to expand their facilities, but was rebuffed by the legislature. Some South Dakota state legislators proposed legislation to allow state-inspected facilities to sell via e-commerce (online), while South Dakota U.S. Senator Mike Rounds, a Republican, twice proposed legislation that would allow meat from state-inspected facilities to be sold interstate, whereas Federal inspection is required for such sales. His idea met a similar fate.

Butter and cheese being stacked and distributed during a surplus of dairy products, circa 1983. (Credit: Dave Buresh/The Denver Post via Getty Images)

 

As a result of all that, and ancillary hoopla in other states with the oligopolistic meat processors, 2 years later, prices still remain artificially high for consumers. And anecdotally, chuck roast — an inferior cut of beef, most often used to make stews — has been seen selling for $12/pound, more than twice the typical, average price. 

 

Here’s where “old school” ideas come into play.

 

Remember “government cheese”? 

 

In similar economic times, in the 1970’s, with rising inflation, high gasoline prices, and widespread economic unrest, dairy producers reduced their production, which essentially created a shortage, thereby increasing dairy products’ prices by 30%. In response, in 1977, the United States government, under the Jimmy Carter administration, promised to, and did, purchase $2B worth of milk, which was then in turn processed into other dairy products, including butter, cheese, dry milk, etc. It was a subsidy, of course, that endured for 4 years, and it incentivized the farmers to produce — and produce they did… in overwhelming abundance. At its height, there were over 500M pounds of government cheese, butter, and dehydrated milk in hundreds of warehouses in 35 states. But at that point, it was a mere stockpile, and had nowhere to go.

 

By 1980, retired actor and former California Governor Ronald Reagan had won the White House, and on December 2, 1981, at a White House function in which the newly-elected POTUS was encouraging farmers’ support of his economic recovery plan, John R. Block, Secretary of Agriculture, appeared with a 5-pound block of cheese, and announced that, “We’ve got 60 million of these that the government owns. It’s moldy, it’s deteriorating … we can’t find a market for it, we can’t sell it, and we’re looking to try to give some of it away. It is illustrative of what we are up against as we accumulate these dairy products.” Secretary Block opposed the Farm Bill as it was written, and sought “accommodations with the dairy area so that we would have some flexibility to turn the costly dairy program around.”

Then-POTUS Ronald Reagan holds a 5-pound block of “government cheese” purchased through the Depression-era Commodity Credit Corporation, which was later Federally chartered in 1949, subsidized dairy farmers in the 1970’s and was later faced with a super-abundance of dairy products, including butter, cheese, and dry milk. The Reagan administration began distribution of the commodity food through his “Temporary Food Assistance” program, and eventually gave away over 300M pounds of dairy products purchased through the program.

The public was quick to criticize the POTUS who had campaigned on the (now known to be false) notion of so-called “welfare queens,” and poverty-stricken individuals who he claimed were “gaming” the system, and pledged to reduce the United States Department of Agriculture’s Food Stamp program in response.

Shortly thereafter, the POTUS relented, and publicly said that, “At a time when American families are under increasing financial pressure, their government cannot sit by and watch millions of pounds of food turn to waste,” and pledged to release about 30M pounds of stockpiled dairy product in a plan he called the Temporary Food Assistance Program, which in turn, distributed the products to the elderly, low-income individuals & families, and organizations that helped them. Ultimately, about 300M pounds of dairy products and cheese were given away. By the 1990’s dairy prices had settled down, and the Federal government exited the market.

 

It was through the Commodity Credit Corporation, a 1933-established, Great Depression-era Federal entity which was created to “stabilize, support, and protect farm income and prices,” and later Federally chartered in 1949, that the purchase and distribution of the food was accomplished.

 

Now, I ask the reader this: 

With rapidly-escalating food costs, and farmers’ increasing losses, could our government once again do something like that, but this time, with pork, beef, chicken, and other food stuffs?

 

It would be a win-win-win-win situation, in which the farmers would get paid for their livestock, locally-owned and operated small meat processors would get paid, truckers would get paid, storage facilities would get paid, and the people would get free meat.