Concentration in the meatpacking industry
Interesting quote from a thought-provoking book, Fast Food Nation by Eric Schlosser (paperback version, Perennial, 2002, p. 283).
The recent purchase of IBP by Tyson Foods has created the world's biggest and most powerful meatpacking firm, with the largest market share in beef and poultry, the second largest in pork. The Tyson/IBP merger fulfills every independent rancher's worst nightmare about being reduced to the status of a poultry grower -- and may portend even faster line speeds at meatpacking plants. In order to complete the purchase, Tyson Foods had to assume $1.7 billion in debt. As a result, the new meatpacking colossus will likely be under great pressure to ship as much meat as possible out the door.
A couple of points. The agribusiness sector like so many others has undergone dramatic consolidation in the past few years. And the big companies like ConAgra, Cargill, and Tyson keep getting bigger. The trend has been to make the farmers who supply these companies little more than indentured servants, a set of powerless producers faced with a powerful oligpsony. Chicken farmers have traditionally had it worse than cattle ranchers, but, as this excerpt notes, that small comparative advantage may soon disappear.
Also, Schlosser rightly points out the true result of a major acquisition. Someone has to pay the interest on the loan, and once the (in this case, small) synergies and redundancies are eliminated, that means squeezing out costs. IBP grew to become a dominant meatpacker through ruthless industrialization. One wonders whether Tyson can squeeze its suppliers and workers even more.
