Food Security And The Size Of Meatpacking Plants
For many agricultural products, the number of processors is a “rate limiting step.” There are numerous suppliers of raw foodstuffs, but far fewer entities that buy those items and convert them into what consumers buy at the grocery store. The supply chain for meat is a case in point. In 2019, the 22 largest beef packing facilities, representing just 3.3% of all plants, processed almost three-quarters (71.7%) of federally inspected cows. The processing of pigs is similarly concentrated. Just 15 plants, or 2.6% of the total, slaughter 61.9% of federally inspected pigs. Meatpacking is most efficient at a large scale, leading to more affordable meat for consumers and higher demand from farm and ranch producers.
This concentration of processors leaves meat supplies vulnerable to disruptions. Accidents, weather, or a lack of workers can slow or stop production. The size of meatpacking facilities means that a breakdown in a single plant can significantly affect meat supplies. The spring of 2020 provided a vivid illustration of this, when COVID-19 spread among plant employees in several locations. Shutdowns at the affected facilities took 40% of production capacity offline for eight weeks. Wholesale prices of meat increased sharply, raising questions about the security of the U.S. meat supply.
This study examines whether less concentration in meatpacking would reduce supply chain risks. To answer this question, the researchers created an economic model of the industry as it was actually structured in 2019. Then, they simulated disruptions and compared outcomes to two other possible industry structures. One increased processor concentration over current levels, leaving just 30 packers for the nation’s entire meat supply. The other diffused production across 22,000 small facilities. The model calculated how producers and consumers would fare as probabilities of shutdown were varied.
Overall, the results showed that external risks and the desired level of output were the primary drivers of simulated outcomes. Unsurprisingly, greater odds of plant shutdowns widened the farm to retail price spread. However, the packers themselves didn’t benefit. In fact, their profits fell because their marginal costs increased. And while it might seem that a market structure with thousands of small packers would be more resilient, that wasn’t necessarily the case. A universe of smaller plants does reduce the variability in output for any given level of shutdown risk as compared with a more concentrated packing sector, but at a loss of cost efficiency. In sum, there are no easy solutions to improved meat supply security. While fewer but larger plants provide a higher level of output, a large number of small plants is better for ensuring a minimum threshold of production.
This article offers a window into the levels of processor concentration in the meatpacking industry. With most meatpacking done in a few enormous facilities, the pandemic exposed significant vulnerabilities in the U.S. meat supply as workers fell victim to COVID-19 and plants had to shut down. Farmers who couldn’t get their animals slaughtered for meat instead just killed and buried them. As animal advocates, we’d like to stop the killing of animals for food. However, as long as meat processing continues, we need to advocate for safety improvements and risk reduction so that animal lives will not be wasted. This paper gives advocates valuable information about just how concentrated the meatpacking industry is, and provides some insight into possible ways that concentration could be leveraged to make change.