HISTORICAL DEVELOPMENT OF THE U.S. LIVESTOCK MARKETING &
MEAT PACKING INDUSTRIES
MARKETING METHODS
• BARTER - Exchange of goods and/or services.
• PRIVATE TREATY - Direct negotiation between buyer and seller. Still widely used today.
• PUBLIC AUCTION - Auctioneer accepts competitive bids from buyers and conducts sale.
MARKETING METHODS
• TERMINAL MARKET - Commission firm represents seller and receives a commission for negotiating sale and selling terms.
• DIRECT MARKETING - Sale may be negotiated by private treaty or by commission firm before livestock moves directly from farm to packing plant
COLONIAL AMERICA
• Early settlers bartered livestock and products for other necessities.
• Since wild game was plentiful, early livestock was used for draft and milk.
• Only after production ceased were they harvested for meat, hides, tallow and other byproducts.
COLONIAL AMERICA
• Livestock produced close to consumers and many sales were direct to butcher or retail market.
• Most home slaughter was done in winter since refrigeration did not exist.
• Excess meat was preserved by smoking, salting or pickling and“packing” in barrels. This is the origin of the term “meat packer”.
COLONIAL AMERICA
• As settlements expanded westward from the east coast, it became necessary to “drive or herd” the livestock back to the eastern population centers.
• Many of our present east - west highways began as livestock trails. U.S. Route 40 is an example
COLONIAL AMERICA
• First commercial meat packing plant was established by William Pynchon in Springfield, MA in 1662.
• As distance from farms to markets increased, livestock dealers became important as drovers who worked for a commission to market the livestock. It was a high risk profession to buy and deliver the livestock.
MARKETING IN THE 1700s
• In 1756, the market in Brighton MA, near Boston became the first public auction market.
• Following the War of Independence, livestock production expanded westward into the fertile Ohio river valley.
• Cincinnati, Ohio became known as “Porkopolis”. Meat and livestock moved down the Ohio & Mississippi rivers.
MARKETING IN THE 1800s
• New England became industrialized, the southern states specialized in cotton and the “Corn Belt” became the center for grain and livestock production.
• Canals, roads and railroads were built to move meat and livestock back to the eastern cities.
• By the mid 1800s, Chicago emerged as the dominant livestock assembling center.
MARKETING IN THE 1800s
• The first livestock commission firm began in Chicago in 1857.
• In 1865, the Illinois legislature incorporated the Union Stockyards and Transit Company
• Packing plants were soon built surrounding the Chicago Stockyards.
• Soon, terminal markets were established in East St. Louis, Kansas City, Omaha, etc.
MARKETING IN THE 1800s
• Prior to the Civil War, cattle ranching in Texas expanded dramatically.
• When the coastal markets were blockaded during the war, the cattle were trailed to the railroad towns of Abilene, Wichita and Dodge City, KS, to be shipped to Chicago.
• The “cowboy” era and trail drives ended about 1880.
INVENTIONS CHANGE THE LIVESTOCK INDUSTRY
• Barbed wire was invented in 1873 - Native prairies and range land could be managed.
• Windmill was adapted to range land - Cattle and sheep did not have to be near streams.
• Refrigerated rail cars - Meat could be processed close to production units and shipped to large population centers.
MARKETING IN THE 1900s
• Mechanical refrigeration was well established by 1890 and meat packing became a year around business.
• By 1903, five major meat packers emerged - Swift, Armour, Cudahy, Wilson & Morris.
• The Packer & Stockyards Act of 1921 provided market regulation and oversight by USDA.
MARKETING IN THE 1900s
• Central terminal markets remained dominant until after World War I.
• The USDA Federal Meat Grading Service was set up in 1926 to grade beef carcasses.
• Establishment of a market news reporting service and an improved highway system enabling the use of trucks to transport meat brought change to the industry.
MARKETING IN THE 1900s
• By the end of World War II, the packing plants moved closer to the production areas, terminal markets declined and direct marketing increased.
• In 1970, the Union Stockyards stopped accepting hogs and in 1971, trading in cattle and sheep also stopped.
AUCTION MARKETS
• Originally were used more for feeder livestock and cull breeding animals than for finished slaughter livestock.
• Increased as the terminal markets declined and have remained fairly stable.
• Future is uncertain except for breeding livestock and horses.
FEDERAL LAWS REGULATING MEAT
• 1906 - The Meat Inspection Act provided for inspection for wholesomeness, freedom from disease and adulteration.
• 1958 - The Humane Slaughter Act.• 1967 - Wholesome Meat Act extended meat
inspection to products in interstate trade.• 1990s - Hazard Analysis of Critical Control
Points (HACCP).
MEAT INDUSTRY TERMINOLOGY
• Slaughter, process & harvest are synonyms.• Ante-mortem = Pre-harvest.• Dressing percentage = (Carcass Weight /
Live Weight) x 100– Sheep = 50%– Cattle = 60%– Swine = 72%– Poultry = 78% to 83%
MEAT INDUSTRY TERMINOLOGY
• Drop, offal, viscera or by-products are terms used to describe the parts removed from the carcass (head, hide, hair, shanks & internal organs).
• “Kosher” refers to meat from animals slaughtered under procedures approved by Orthodox Jewish Law.
LARGEST MEAT PACKERSBEEF 2000
• IBP - Iowa Beef Processors (div. Of Tyson)– $ 9.3 billion in beef sales
• Excel - (division of Cargill Inc.)– $ 7.0 billion in beef sales
• ConAgra Beef– $ 6.0 billion in beef sales
• Farmland - $ 2.8 billion in beef sales• Smithfield - $ 2.3 billion in beef sales• These top 5 companies harvest 85% of the steers and
heifers processed in the U.S. each year.
LARGEST MEAT PACKERS PORK 2000
• Smithfield Foods processes 18.8% of U.S. pork processing. Largest hog slaughterer with daily capacity of 78,500 head.
• IBP has 17.6% of U.S. pork processing.• ConAgra has 10.5%• Excel has 9.7% and Farmland has 8.0%• These top 5 companies harvest 65% of the
U.S. pork production.
LARGEST MEAT PACKERS POULTRY 1999
• Tyson Foods (AR)- $ 7.5 bil. in sales
• Perdue Farms (MD) - $ 2.5 bil. in sales
• Gold Kist (GA) - $ 1.6 bil. in sales
• Pilgrim’s Pride (TX) - $ 1.3 bil. in sales
• Foster Farms (CA) - $ 1.1 bil. in sales
PER-CAPITA CONSUMPTION RETAIL WEIGHT 2000
• BEEF 64.4 lb.
• VEAL 0.5 lb.
• PORK 47.7 lb.
• LAMB 0.8 lb.
TOTAL RED MEAT 113.5 lb.
PER-CAPITA CONSUMPTION RETAIL WEIGHT 2000
• CHICKEN 52.9 lb.
• TURKEY 13.6 lb.
TOTAL POULTRY 66.5 lb.
TOTAL RED MEAT &
POULTRY 180.0 lb.
PER-CAPITA SPENDING 2001 BEEF, PORK & CHICKEN
• BEEF $213.4347.0%
• PORK $135.2628.5%
• BROILER $116.39 24.5%
TOTAL $ SPENT $ 475.08