The Consolidation Problem: Market Power in the Meat Industry

What it is

The industrial food animal system is not merely large; it is extraordinarily concentrated. A small number of corporations control the production, processing, and in many cases the retail distribution of the majority of American meat. This concentration has consequences for farmers, workers, consumers, and the competitive functioning of the market that deserve attention in any serious analysis of the system.

The numbers: In beef processing, four companies — JBS, Tyson Foods, Cargill, and National Beef — control approximately 85% of U.S. steer and heifer slaughter capacity. In pork processing, four companies — Smithfield (owned by WH Group of China), Tyson, JBS, and Seaboard — control approximately 70% of hog slaughter. In broiler chicken production, the top four companies — Tyson, Pilgrim's Pride (controlled by JBS), Sanderson Farms (acquired by Wayne-Sanderson), and Perdue — control approximately 60% of production. Egg production is somewhat less concentrated but still dominated by a small number of very large producers.

This concentration is the result of decades of consolidation driven by the economies of scale in industrial processing, the capital requirements of modern slaughter facilities, and the deliberate strategy of large integrators to control as much of the supply chain as possible. It has had specific consequences for the farmers who contract with integrators to raise poultry and hogs: the tournament pricing systems used by major integrators, in which contract growers are ranked against each other and compensated partly based on their performance relative to other growers (using inputs the integrator controls), have been a subject of sustained criticism from agricultural economists, farmer advocates, and the USDA. The power asymmetry between the large integrators and the contract farmers who are required to make substantial capital investments in facilities designed to the integrator's specifications — and who have no alternative market if the integrator terminates the contract — is a structural feature of the system.

The Biden administration's Antitrust Division pursued increased scrutiny of meat industry concentration as an economic justice and food price issue, particularly following price increases during the COVID-19 pandemic period that were attributed in part to the market power of consolidated processors. Whether this attention results in structural change remains to be seen.

Reference notes

Cross-link to: Meatpacking Industry Concentration, Contract Farming in Poultry, JBS / Tyson / Cargill (company entries), Antitrust and Food, The Market Power of Food Corporations.

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