The structure of the beef industry's supply chain, relative to the pork and poultry industries, exhibits great diversity. The beef industry's supply chain contains a number of different management and marketing alternatives coordinated by market forces to move beef products from the producer to the consumer. The majority of production and processing of cattle is located in the central U.S. from Texas north to the Canadian border. The structure of the supply chain is outlined in Fig. 1.
Figure 1 provides a general overview of the present feeding, marketing, and distribution alternatives in the beef industry today. Small independent producers dominate the cow-calf segment of the beef industry. Ownership and management responsibilities of beef cattle are often transferred several times between the postweaning and the preslaughter phases of an animal's life cycle. For example, 1) meat packers can act as integrators, acquiring and maintaining ownership of an animal from the cow-calf operation until the consumer purchases the beef product from a retail outlet, or 2) cow-calf producers can retain ownership until slaughter. However, ownership across different production stages in the beef industry is minimal relative to the pork and poultry industries.
The production and processing of slaughter cattle have changed dramatically over the last 50 years. Increased concentration in the packing and feedlot segments of the beef industry has resulted in a dramatic decline of the number of firms involved in both the feeding and processing segments of the beef industry. In the feedlot industry the number of firms declined from 104,000 in 1972 to 41,000 in 1995. In the meat packing industry, the number of plants required (processing more than 2000 head annually) to report to GIPSA declined from 856 in 1974 to 204 in 1999.
In the feedlot industry, prior to 1962, almost 64% of marketed fed cattle were fed in farmer-owned feedlots with an annual capacity of less than 1,000 head. Today, less than 25% are marketed from these small feedlots. The largest 400 feedlots in the United States market 50% of the fed cattle.
The USDA estimated that the four largest meat packing firms slaughtered 81.5% of all marketed finished steers and heifers in 2000. Increased concentration in the processing segment of the beef industry has been driven by firms seeking to reduce production costs. Meat packing firms have moved from urban areas with terminal markets to feed-grain production regions of the Midwest. As a result, packer purchases from public markets (all cattle types) declined from 46% in 1960 to 14% in 1999. This structural shift has been driven by economics as it is more cost-effective to process slaughter cattle in grain producing regions and ship boxed beef to urban areas than ship live cattle to urban areas for processing. It is the general consensus of agricultural economists and regulatory authorities that increased concentration in the feeding and processing segments of the beef industry has affected price discovery in the slaughter cattle market. Recent passage of federal livestock mandatory price reporting
Production / Management Marketing Marketing
System Channel Destination
legislation and ongoing Congressional hearings on the competitive impact of packer ownership of slaughter cattle provide anecdotal support for this statement.
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