Consolidated and Substitutable: The U.S. Meat Processing Industry
After charging a couple of poultry companies with price-fixing, the U.S. Justice Department has recently opened a formal probe into the beef processing industry. This follows a previous statement from May in which politicians requested that the Justice Department investigate beef prices’ recent surge. The concern is that the meatpacking industry, which was recently deemed “critical infrastructure” due to COVID-19, is suppressing prices paid for cattle by purchasing fewer – devaluing cattle operations and increasing meat prices paid by consumers. While the traditional U.S. meat industry stumbles, the fake meat industry is seeing a growth in exposure and sales. Ground-meat prices doubled between March and May, leading to a 264% spike ($25.7 million increase) in grocery store sales of alternative-meat products during a nine-week period ending May 2nd. This article explores the current U.S. meat industry, the benefits and drawbacks of a consolidated meat market, and whether a fragmented meat market may bolster U.S. agricultural sustainability.
The U.S. meat industry, historically, has had issues with both sanitation and market consolidation - improved by the Federal Meat Inspection Act (as influenced by Upton Sinclair’s “The Jungle”) and an antitrust lawsuit against the industry in 1920, respectively. Nevertheless, the modern U.S. meat industry is once again being criticized for poor working conditions and being too consolidated. Using Herfindahl-Hirschman Index figures, we can see that U.S. meat processing consolidated quickly in the late 20th century; this consolidation was driven by an increasing food demand and greater economies of scale achievable using improved technologies (Barkema, Drabenstott, & Novack, 2001). The extreme consolidation of meat processors has now been brought to national attention as ranchers lose $300-$400 on each cow, processors make windfall profits, and end-consumers pay more for packaged meat. Corporate-owned facilities, on the other hand, have had to euthanize animals due to excessive birth rates. Small, local ranchers have been vocal on these issues, but meat industry tycoons have historically managed to delay and fight regulations due to their massive influence on Washington. Dan Glickman, former U.S. Secretary of Agriculture, suggested that America has largely ignored such market issues due to meat’s low prices. In fact, United States citizens consume the largest amount of meat by kilograms per capita, despite paying the lowest percent of their consumer expenditures on food.
Market consolidation is largely responsible for these low prices. Of course, there were efficiency gains when transitioning towards refrigerated food trucks and packing boxes of beef rather than carcasses of beef. Large processing facilities also have access to greater financial resources necessary in purchasing high-tech capital, and they are able to transport greater quantities of meat to a greater number of people. Such efficiency gains among meat processors have allowed them to handle beef from a larger number of ranchers and, thus, decrease ranchers’ supplier power. The industry’s consolidation has also increased processors’ supplier power over grocery stores, which often stock multiple products from each of the processing industry’s leading firms. While meat industry advocates claim there exist equally consolidated markets across other large American industries like banking and auto-manufacturing, market failures within a nation’s food chain can cause serious food supply issues. The U.S.’s consolidated meat market’s inability to withstand COVID-19 has been internationally juxtaposed with Europe's fragmented meat industry in which there has been no serious supply issues.
Such fragmented markets may be better for meat industries for multiple reasons. At the cost of higher meat prices, smaller farms and processing plants may allow fair competition, reduce risks of wide-spread contamination, lower meat’s carbon footprint, and stabilize rural communities. Further, largely consolidated markets provide massive barriers to entry – even for substitute products. Given the potential efficiency and environmental gains of meat-alternative products, a more strictly-regulated meat industry would also allow meat-alternative manufacturers to compete and perhaps gain a larger market share.
A common argument for the consumption of meat-alternatives is the largely negative impacts of traditional meats on the environment. In fact, cultivating cows and lambs result in the highest greenhouse gas emissions as compared with other foods. Cows in particular result in massive amounts of emissions due to their natural release of methane (Petrovic et al., 2015) as well as required land conversion to ranch them. Beyond emissions, the production of beef also consumes large amounts of water, chemicals, electricity, and packaging materials (Petrovic et al., 2015). Despite this, beef represents roughly a quarter of American meat processed and consumed by pound, and its consumption has been trending upwards since 2014.
The two major alternatives to traditional meat are plant-based meat and cultured meat. Plant-based meat companies like Beyond Meat often tout their burgers’ lower environmental impact as compared with traditional meat. The University of Michigan found that, from cradle to distribution, Beyond Meat burgers generate 90% less greenhouse gas emissions and require 46% less energy, 99% less water, and 93% less land compared to a quarter pound of U.S. beef. Cultured meat, on the other hand, is that produced in vitro through tissue engineering. Compared to traditional meat, cultured meat requires lower energy, water, and land usage (7–45%, 78–96%, and 99%, respectively) as well as produce 82-96% lower greenhouse gas emissions (Petrovic et al., 2015). Given these significant advantages and marginal differences in taste, cell-based meats have the potential to violently disrupt meat markets. In fact, the first cell-based hamburger was unveiled in 2013, yet reports are showing that the cell-based meat industry will already account for 35% of all meat by 2040. The industry’s potential for rapid growth is partially why it accumulated roughly $73.3 million in investments by 2018 - some of which was invested by current meat giants including Tyson and Cargill.
On the other hand, meat industry advocates claim that these studies are often misleading. Whereas many studies portray meat production data by pound of meat consumed, examining these same data measured by nutritional value instead reveals that meat may actually provide greater nutrition by carbon emissions than do vegetables. Further, both cultured meat and plant-based meat companies have been criticized for making wild claims of sustainability. Often-cited figures, including those previously discussed, are based on third-party estimations of emissions rather than research facilitated by alternative-meat companies themselves. In reality, cultured meat results in only a little less emissions than does traditional beef, while plant-based meat results in roughly the same emission levels as traditional chicken - meaning the production of plant-based meats emits roughly a fifth of that of cultured-meats. Given cultured meat’s novelty, however, techniques will likely be improved to reduce this figure. Further, one’s knowledge regarding the environmental effects of the livestock industry affects one’s diet (Dopelt, Radon, & Davidovitch, 2019), so a social movement towards Mediterranean and alternative-meat diets can drastically improve alternative-meat sales among everyone, not just activists.
Of course, such a consumer-shift would both disrupt meat markets and hurt massive meat processors. This shift would also lower the demand for cattle as well as cattle feed – further hurting ranchers while also greatly reducing America’s usage of land for cattle and cattle feed. While an alternative meat diet would lower greenhouse gas emissions as well as land, water, and energy usage, helping the ranching industry requires federal intervention and antitrust investigations. For this reason, the probe into the meat industry, while overdue, represents a huge step forward for local and small ranchers in their fight to keep the U.S. meat industry competitive. Beyond that, the probe as well as the current meat shortage may stimulate the transition towards alternative meats.
Works Cited:
1. Barkema, A., Drabenstott, M., & Novack, N. (2001). The new US meat industry. Economic Review-Federal Reserve Bank of Kansas City, 86(2), 33-56.
2. Dopelt, K., Radon, P., & Davidovitch, N. (2019). Environmental Effects of the Livestock Industry: The Relationship between Knowledge, Attitudes, and Behavior among Students in Israel. International journal of environmental research and public health, 16(8), 1359.
3. Petrovic, Z., Djordjevic, V., Milicevic, D., Nastasijevic, I., & Parunovic, N. (2015). Meat production and consumption: Environmental consequences. Procedia Food Science, 5, 235-238.
