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