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AMI Says Wide Array of Factors Drive Structural Changes in U.S. Meat Industry

Wednesday, October 20, 1999

Structural changes in the meat packing industry are testament to a successful industry that is able to respond to market conditions, American Meat Institute (AMI) President J. Patrick Boyle said in testimony delivered today before the House Judiciary Committee.

“One of the reasons for U.S. agriculture’s success is its ability to change in response to market conditions, new opportunities or technological improvements,” Boyle said. “This ability to change is a hallmark of America’s great free market economy.”

Boyle acknowledged that the pace of structural change has been a challenge for all players in the food and agriculture sectors, both small and large, but said that ultimately the consumer has benefited. “Testament to this is the fact that U.S. consumers still spend a smaller percentage of disposable income on food than anywhere else in the world or at any other time in history,” he said.

Boyle said that although consolidation has occurred within the meat packing industry, tough competition and new technologies have led to consolidation in many industries. He noted that food retailers are consolidating at a faster pace than their food manufacturing suppliers. In 1998, five retailers accounted for 40 percent of sales, while five years earlier, it took 20 companies to reach the same percentage.

Dozens of studies have been conducted over the past ten years to examine the impact of increased consolidation in the meat packing industry, according to Boyle, and none have identified any significant harm to livestock producers caused by consolidation.

“In fact, one effect of consolidation has been to lower meat prices to consumers – on average five to six percent lower than they were 15 years ago,” Boyle said.

He also argued that the federal government is well-equipped with investigative and enforcement authority to oversee the structure of the industry, noting that the Justice Department, Federal Trade Commission and Grain Inspection and Packers and Stockyards Administration all scrutinize the industry and can take strong actions in response to any violations. Although cattle and hog producers are receiving on average 20 percent higher prices today than one year ago, Boyle said improved demand for meat products will help producers even more. AMI said that three solutions will truly benefit livestock producers in the long-term: 1) a natural market correction, 2) expanded export markets and international trade and 3) helping
producers better manage risk.

In closing, Boyle cautioned the committee that the government must carefully consider any unintended industry structure consequences of regulatory initiatives. Mandatory price reporting, zero tolerance for certain pathogens, aggressive Immigration and Naturalization Service (INS) enforcement actions and new environmental polices all create enormous burdens on small and mid-sized companies – burdens that can trigger increased consolidation as small companies sell their business to larger companies.

“AMI believes government has a legitimate role in monitoring the changes currently underway in agriculture and ensuring competition. But government also has a responsibility to ensure that it understands the implications of the policy initiatives it mandates,” Boyle said. “And the business community -- both in production agriculture and in processing and retailing – deserves government’s diligent examination of all facts before new and costly mandates are applied through legislation or regulation.”

AMI represents the interests of packers and processors of beef, pork, lamb, veal and turkey products and their suppliers throughout North America. Headquartered in Washington, DC, the Institute provides legislative, regulatory and public relations services, conducts scientific and economic research, offers marketing and technical assistance and sponsors education programs.

For more information contact:
Janet Riley
Vice President, Public Affairs
James Ratchford
Manager, Public Affairs

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