Protectionist policies will hurt, not help.
Study after study and analysis after analysis have confirmed that the U.S. meat industry is dynamic and competitive. The industry's structure is a response to input from retail and restaurant customers and consumers themselves.
The quotes below are just a sample of the conclusions reached by expert analysts who have studied the U.S. meat industry. Together they affirm a consistent conclusion: the market works.
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"Both [producers and packers] agreed that if packers could not own cattle, higher returns would be needed to attract other investors and that beef quality would suffer in an all-commodity market place." GIPSA Livestock and Meat Marketing Study, January 2007
"Today, consumers spend just 10 percent of their income on food, compared with almost 18 percent in 1960. "
"In aggregate, restrictions on the use of AMAs for sale of livestock to meat packers would have negative economic effects on livestock producers, meat packers and consumers. " GIPSA Livestock and Meat Marketing Study, January 2007
"Overall, the existing empirical literature suggests that captive supplies can improve efficiency in the overall beef supply chain by improving price signals, reducing risk, and improving production and procurement efficiencies. "
"ERS and the Census Bureau used statistical techniques to isolate the effects of mergers and acquisitions on wages and employment during two merger waves. The research found that mergers and acquisitions were no more likely to lead to job cuts than other causes of restructuring. After controlling for plant size, capital investment, initial wage levels, and other plant characteristics, analyses of Census of Manufacturers data show that mergers and acquisitions had a positive effect on employment in six of the nine industries during the first study period (1977-87), but no effect during the second study period (1982-92)." Do Food Industry Mergers and
Acquisitions Affect Wages and
Employment?
"The existing literature suggests that departures from competition in cattle slaughter have been small and rare." Consolidation in U.S. Meatpacking, February 2000
"Marketing arrangements benefit producers through providing premiums for specified cattle quality characteristics, obtaining carcass information, ensuring a buyer for cattle and reducing marketing costs. Meat packers use marketing arrangements to increase cattle quality control, secure slaughter needs, and reduce procurement costs. "
"Consumer food demand is shifting toward food products that are easy to prepare while also promising safe eating and improved nutrition. The food industry's efforts to fulfill consumers' food needs have shifted competitive balances among food companies, triggering broad efforts to maintain or gain a competitive edge by capturing economies of size and trimming costs. The result is the transformation in food retailing, meat processing, and livestock production." The Main Street Economist, Federal Reserve Bank of Kansas, April, 2001
"While the research found a small amount of packer market power in product (beef) markets, no statistically or substantively significant departures from competitive prices in the input (cattle) market were present. In the highly concentrated cattle market of the period, cattle prices did not fall below competitive levels." Controversies in Livestock Pricing, Agricultural Outlook, December 2002
"Test results showed no evidence to support the assertion that increasing slaughter concentration results in lower farm prices. The wholesale - to - retail portion of the price spread is growing because of costs for additional packing services and new products in the packing industry." U.S. Beef Industry: Cattle Cycles, Price Spread and Packer Concentration, April 1999
"..nothing in the data suggests that the adverse profit situation of 1996 that prompted the latest round of packer concentration studies was unexpectedly worse or out of character for where the cattle industry was in 1996 in terms of the cattle cycle of the 1990's. The research reported here did not find cattle inventory numbers or net returns to cow/calf producers above cash costs to have fluctuated during the 1990's beyond what would have been expected at least 95 percent of the time." U.S. Beef Industry: Cattle Cycles, Price Spread and Packer Concentration, April 1999
"Further, our estimates imply that, while there was a shift in pricing systems behavior during 1992 to 1996, the shift raised prices for live cattle, wholesale, and retail beef prices higher than they would have been, given earlier patters of reaction to supply and demand shocks. The farm-wholesale price spread has been unaffected by the shift, and the wholesale-retail spread has declined. " U.S. Beef Industry: Cattle Cycles, Price Spread and Packer Concentration, April 1999
"In general, increased supplies of red meat and poultry, coupled with declining consumer demand, appear to have had the largest negative effect on livestock prices. Increases in meat packer concentration have had minor effects."
"Packer owned livestock accounted for a small percentage of transactions for beef and lamb (5% or less), even when the small percentage of partial ownership arrangements is included." GIPSA Livestock and Meat Marketing Study, January 2007
"Forward contracts can benefit both producers (including cattle feeders) and meat packers. Producers can benefit through reducing price risk, obtaining favorable financing, ensuring a buyer for cattle, and reducing marketing costs. For meat packers, forward contracts secure slaughter needs, secure quality cattle, reduce procurement costs, and reduce price risk."
"Packer-owned feeding operations also can benefit both producers and meat packers. Producers can increase feedlot utilization and improve packer-to-feedlot relationships. Meat packers are able to secure slaughter needs and increase cattle and beef quality control."
"While increasing supply will dampen price, the most important source of declining livestock prices is technical innovations which have led to increasing productivity. Increasing productivity means that livestock can be produced at lower costs or that more can be produced at the same cost. Economic competition among producers pushes livestock prices toward production costs." Controversies in Livestock Pricing, Agricultural Outlook, December 2002
"Our results confirm that technological change in the meat packing industry has reduced farm-wholesale marketing margins and contributed to higher real livestock prices. However, the negative effects of farm-level technological change on livestock prices have dominated these positive effects, and contributed to lower real livestock prices." |