Abstract
Significant plant- and industry-wide disruptions have occurred in the U.S. meatpacking industry during the past several years. The result has been a reinvigorated interest in the possibility that industry concentration has facilitated anticompetitive behavior and a torrent of public policy proposals to improve resiliency. In this paper, we provide a contemporary synopsis of meat processing concentration statistics with the use of annual plant-level food safety and inspection service (FSIS) data that cover all federally inspected livestock processing facilities in the U.S. for the past 30 years. Beyond considering traditional concentration measures (e.g., CR4 and HHI), we exploit the plant-level nature of the data and consider trends in processing facility consolidation, ownership changes, and how regional procurement markets have changed over time.
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Data Availibility
The data used to conduct this analysis are not publicly available and were obtained via a cooperative work agreement with the Office of the Chief Economist. Non-Disclosure Agreements limit our ability to share information that discloses any particular company’s identity. The findings and conclusions in this article are those of the authors and do represent any official U.S. Department of Agriculture or U.S. government determination or policy.
Notes
The most often reported concentration ratio when surveying the economic literature on U.S. meatpacking is CR4—the market share of the four largest firms in the industry.
During the 1980s business conglomerates liquidated the meatpacking operations that they had acquired during the 1970s. These plants were either shuttered or sold to “new” meat packers: e.g., ConAgra, Cargill (Ollinger et al., 2005).
The CR4 in hog processing increased by only 35% from 1980 to 1995, compared to the 125% increase in beef during the same period (Crespi et al., 2012).
The later event precipitated U.S. Senate Agricultural Committee hearings and a U.S. Department of Agriculture (USDA) investigation (U.S. Department of Agriculture, 2020).
The Federal Meat Inspection Act (FMIA) requires that all meat sold commercially be inspected and passed to ensure that it is safe, wholesome, and properly labeled. The USDA Food Safety and Inspection Service (FSIS) is responsible for providing this inspection. The FMIA requires inspection for any product that is intended for human consumption, wholly or in part, from the carcass or parts of any cattle, sheep, swine, and goat. Animals must be slaughtered and processed under Federal inspection, and the meat food products must be inspected and passed for human consumption. This inspection process generates counts and data for every animal that is slaughtered in every federally inspected meatpacking plant in the U.S. More information on inspection is available here: https://www.fsis.usda.gov/inspection/inspection-programs/inspection-meat-products.
Throughout this paper, “cattle” refers to steers and heifers unless otherwise indicated. The majority of beef cattle that are slaughtered in the U.S. are steers and heifers. Younger animals have a different size and shape, which requires specialized processing operations/lines. Cows and bulls that are harvested are more commonly marketed directly from production operations after being culled from breeding herds. The outputs from these types of plants are also different with steer and heifer plants producing primal (i.e., muscle) cuts and cow and bull plants producing leaner beef that is often mixed with the trim from steers/heifers to create ground beef.
Additionally, slaughter weight for federally inspected chicken and—to a lesser extent—steer and heifers and swine have also been increasing over this period (see panel (c) of Figure 1). Thus, production has increased even more when evaluated on a per-pound basis.
Note that the analysis below is performed on the basis of the fiscal year, rather than the calendar year, due to FSIS data availability.
Wholesale meat prices are obtained from the USDA Economic Research Service (ERS) “Livestock and Meat Domestic Data”, available at https://www.ers.usda.gov/data-products/livestock-and-meat-domestic-data/.
Consider an example from Crespi et al. (2012): Consider two industries—A and B— that are each composed of five firms. Industry A’s firms have the following percentage market shares: 50, 20, 10, 10, and 10, resulting in an HHI of 3200. The five firms in industry B have percentage shares of 30, 20, 20, 20, and 10, resulting in an HHI of 2200. The CR4 for both industries is 90%, but the higher HHI in industry A reflects the very large share of one of its firms.
The DOJ’s horizontal merger guidelines for 1982–2009 divide the spectrum of market concentration, as measured by the HHI, into three categories: unconcentrated (HHI below 1000), moderately concentrated (HHI between 1000 and 1800), and highly concentrated (HHI above 1800). The proposed 2023 merger guidelines would reinstate these HHI division points.
Crespi et al. (2012) calculate HHI with the use of 6-digit NAICS Industry Sales data. These data are aggregated such that the resulting HHI measure is representative of the concentration in beef and swine processing in aggregate.
The DUNS number is a unique nine-digit identification number that is assigned to all businesses in the U.S. by Dun & Bradstreet.
Note that these data include only kill plants—processing plants that slaughter animals—and not plants that are responsible solely for further processing.
Note that the 150-mile radius is chosen for the purposes of being conservative. Prior literature has suggested that the catchment area for broiler plants is a 30-60 mile radius (MacDonald, 2018). Ward (1990) found that most cattle are purchased for a specific plant from within a 100-mile radius of that facility. Within this analysis, we do not control for the possibility that one or more other plant within the 150-mile radius may also be owned by the same company as the plant at the center of the 150-mile radius. Thus, these estimates may overstate the intensity of competition.
Complete spatial competition density estimates for fiscal years 1991 and 2021 are shown in Appendix Figure A3.
During the Department of Justice’s listening sessions in 2010 one cattle producer summarized what many testified to: “While potentially there are four market participants, what we see typically region by region is that there are really one to two meaningful participants, rarely three, and four meaningful participants is very much of an oddity” ( U.S. Department of Justice (2010), 211:6-10).
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This work was funded as part of USDA Cooperative Agreement 58-0111-21-022.
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TS, AS and DS were responsible for data analysis and prepared the initial draft of the manuscript. All authors reviewed and commented on the manuscript and advised data analysis as necessary.
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Saitone, T.L., Schaefer, K.A., Scheitrum, D. et al. Consolidation and Concentration in U.S. Meat Processing: Updated Measures Using Plant-Level Data. Rev Ind Organ 64, 35–56 (2024). https://doi.org/10.1007/s11151-023-09923-z
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DOI: https://doi.org/10.1007/s11151-023-09923-z