The Meat Industry 1

The Meat Industry in America Quintina Richmond Axia College of University of Phoenix ECO 205 Economic Theory Shawn Brown June 24, 2007

The Meat Industry 2 The Meat Industry in America The meatpacking and processing industry is an industry that handles the distribution of animals, processing and slaughtering for the human consumption which has undergone a significant makeover in recent years. Consolidation and structural changes have had deep impacts on employees and communities in the U.S. When the market demand is at a slow growth rate plants begin to consolidate leading to less competition. Such changes can lead to small-scale producers to lose out and consumers benefiting from lower prices. Shifts in Price Elasticity of Supply and Demand The United States meat industry is a 90 billion dollar business. The meat industry provides over 270,000 jobs for people. Livestock and meat production is the economic cornerstone for many rural communities. The meat industry is the largest part of the agriculture. Even though raw meat and poultry contain bacteria, meat plants have reduced bacteria levels making meat in the U.S. the safest. American consumers enjoy eating meat, it is plentiful and affordable (Best Food Nation, 2006). Now that many consumers are leaning towards nutrition the demand for food products, especially meat has changed. Many consumers believe that high-fat and protein diets have been the causes many health problems. This concern has declined consumption of meat. Statistics show that there is not much change between meat and poultry, but when pork, chicken, and beef are compared alone beef has declined and chicken has increased. Due to cholesterol, calorie content, and artificial ingredients beef has a negative effect on quality insight compared to other meats (American Educations, 2000).

The Meat Industry 3 The price elasticity of demand for the meat industry is inelasticity. There are not substitutes for meat, but you can get protein from other sources of food such as protein shakes. Meat can be either a luxury or a necessity. Meat is a food which we as humans have to have in order to survive, but there are other foods to eat other than meat. Many people cannot afford to eat meat on a regular basis, so for them it would be a luxury to have meat. Then there are those who have to have meat with every meal therefore making meat a necessity. Depending on how you look at it determines whether meat is a necessity or luxury. The price of elasticity of supply is that the more meat that is on the shelf the lower the cost and the least that is on the shelf the cost are more. Positive and Negative Externalities In 1989 prepared foods R&D survey concluded that meat companies ranked below average. Prepared food companies such as, Tyson, Hormel and Oscar Mayer had the highest investment in R&D with 2.32% of weighted sales revenue. According to U.S. Dept of Agriculture statistics beef consumption declined due to the seafood and poultry industry. The red meat industry has chosen to fight back focusing on three emphasis, economy, quality, and new products. Offering new and more nutritious products at a better price should improve economy. Negative factors such as high-fat, high-cholesterol, and high-calorie are reason why processors have chosen to look towards more nutritious meat. Trimming meat to make it leaner, using portion control, and boneless accommodates the marketplace demand. Many consumers pay for quality therefore processors believe that improving the quality and charging for it consumers will purchase meat with no problem (Best, 2004).

The Meat Industry 4 Food safety is a very. Many people believe and blame the U.S. Department of Agriculture for causes of our nation's troubles is the lack of responsibility of the meat industry and the inadequacy of the federal regulation. Under the current system we cannot get rid of bacteria or potentially life-threatening bacteria from our meat. It is our responsibility along with commercial food preparers not the government to avoid foodborne illness. Society has to take part blame for continuous threat posed but natural food pathogens, not government. Raw meat is flesh and tissue and all tissue contains bacteria. Over 7,000 inspectors examine carcasses every year in an effort to keep diseased meat from going to the market. Proper preparation and handling reduces the health risk of food-borne bacteria. Cooks should cook meat until gray or brown and the juices run clear to avoid transferring bacteria (Whelan, 1993). The meat industry produces public goods which are both positive and negative externalities. On the positive side processors have been trimming meat to make it leaner and healthier for consumers. On the negative side of things meat contains bacteria and the industry has been trying for years to keep it under control. Even though there has been Ecoli and other pathogens break outs from time to time causing uproar in the society I must say that processors and inspectors have done a good job at keeping meat safe for consumers. Wage Inequality There are many different professional and non-professional job opportunities that are available within the meat and poultry industry. Many opportunities require little or no training at all to fulfill many manufacturing functions. Other job opportunities require extensive training or a degree in meat, animal and food science.

The Meat Industry 5 Basically the desire to work and learn is all that is needed as with any other job. The U.S. meat and poultry packing and processing industry employ an estimated 500,000 people (AMI, 2006). Wages paid to hourly employees in the meat and poultry industry vary depending upon the nature of the job performed and the demographic region where plants are located. In 1994 the average salary for poultry and processing plant employees earned $7.73 an hour; meat processing plant employees earned $10.05 an hour; and meat packing employees earned $9.43. Salaried employee wages vary also depending upon the region where the company is located and the size of the company. These jobs provide good pay and benefits that many workers seek (AMI, 2006). Meat and poultry consumption is at an all-time high whose products continue to be in demand. The meat and poultry industry is a booming which is good news for companies and their employees (AMI, 2006). According to Minnesota Public Radio (2006) industry experts say that, immigration raids on meatpacking plants in six states could fundamentally change the industry if crackdowns spread to other slaughterhouses, potentially forcing companies to pay higher wages and raising the price of meat for consumers. Many see the raid as getting an immigration bill passed through Congress which will show the governments ability to enforce work laws (Minnesota Public Radio, 2006). If immigration raids continue it could decrease cattle prices paid to cattle producers and feeders. Not only would cattle prices decrease but there would also be a decrease in labor supply, causing a higher labor cost and higher wages. Slaughter

The Meat Industry 6 statistics nationwide showed that the raid only affected one days work and that the production was actually up by a fraction (Minnesota Public Radio, 2006). In the 1960s and 1970s meatpacking industry move towards the Great Plains near immigrants. During this time meatpacking wages were about 14 to 18% higher than manufacturing plants. 45% of the meatpacking industry was unionized. By the end of the 1980s immigrants accepted jobs in the meat industry causing unions to dropped to 21%. By 2002, manufacturing plants wages were higher than meatpacking wages which were below 25% (Minnesota Public Radio, 2006). There is an inequality within the meat industry as with many other industries. In the meat packing industry there are several careers where different levels of experience, knowledge, and education is required. When the industry took into consideration the skills, knowledge, and education that individuals have is there way of determining the rate of pay that they are going to offer. Monetary and Fiscal Policies U.S. meat consumption has been affected by changes in comparative prices for meat, consumer income levels, taste and preferences for meat and poultry. Beef prices that were measured in 2004 had declined over the whole quarter period. Meat distribution and sales occur through several successive stages. Livestock producers, feeders, and finishers sell live animals to meat packers. Based on sales transactions data from beef packers and pork packer, approximately 15% of beef packer sales and 21% of pork packer sales are to meat processors and food manufactures. The remainder of sales represents product that has completed processing and is ready for final cooking or preparation before consumption.

The Meat Industry 7 In 2003, U.S. consumers spent over $900 billion on food. Food expenditures by families and individuals accounted for 10.3% of disposable personal income in 2003. Food store sales reached $370 billion, accounting for over 74% of food at home sales. Fresh meat, poultry and fish sales comprised 13.3% of supermarket sales, making meat, poultry and fins on the highest selling categories in retail stores. In 2004, National Meat Case Study (NMCS) found that beef, pork and chicken represented 90% of fresh meat. Beefs share was 43%, porks share was 22%, and chicken was 25% (USDA, 2003). Most meat and poultry plants are located in low populated areas near farms. Even though unemployment rates are below 4%, employment remains a challenge because labor shortage reduces productivity Employment rates among the meat and poultry packing and processing industry has almost doubled since 1975. In 2002 there were over 520,000 workers working in the meat and poultry industry compared to 1975 when the employment rate was at 235,000. It is predicted that by 2012 the meat and poultry packing and processing industry will increase employment by 15%, employing more than 600,000 workers (AMI, 2003). Monetary and fiscal policy affects the meat and poultry industries employment rate, price of a product and growth when inflation continues to rise. This causes the industry to make changes to increase prices, growth of the company slows down and employment is at a stand still. In contrast, the meat industry is a multibillion dollar industry that is affected by the economy. When technology and the demand for structural change occurs many plants close but the value of shipment per plant rises causing an inflation-adjusted prices. For instance, inflation causes the meat industry prices to increase and the demand decrease

The Meat Industry 8 which in turn affects employment, wages, sales and consumption. However, when the economy is doing well the demand for meat increases and the prices decrease. In order for the meat industry to survive the economy it has to continue to grow at a rapid pace to attain a sufficient scale.

The Meat Industry 9 References American Education. (2000). The meat & poultry industry. Retrieved May 3, 2007 from www.american.edu/carmel/ma5901a/industry.htm American Meat Institute. (2003). Human resources. Retrieved June 12, 2007 from, www.meatami.com American Meat Institute (AMI). (2006). Profile: U.S. meat and poultry industry workforce. Retrieved May 27, 2007 from, www.meatami.com Best Food Nation. (2006). American meat industry. Retrieved May 3, 2007, from http://www.bestfoodnation.com Best, D. (1990). Technology beckons to meat industry. Retrieved May 9, 2007, from http://www.findarticles.com Minnesota Public Radio. (2006). Immigration raids could affect wages, meat prices. Retrieved May 27, 2007 from http://minnesota.publicradio.org Whelan, E.M. (1993). Bacteria in the meat? Just turn up the heat. Retrieved May 10, 2007, from www.acsh.org