Washington, DC, July 16, 2002
– Vertical integration and strategic
alliances used in many American industries
should not be made illegal for meat packers,
according to the American Meat Institute (AMI),
for such an action will turn the clock back on
industry progress and the quality provided to
consumers. AMI President J. Patrick Boyle vowed
to fight efforts to ban packers’ ability to
own and control livestock when he delivered
testimony today before the Senate Committee on
Agriculture.
“We will oppose any
effort to restrict meat packers who comply with
existing antitrust and fair business practice
laws from sourcing their raw materials in any
way,” said AMI President J. Patrick Boyle.
“It is unfair to make it illegal for the meat
industry to compete effectively with the
vertically integrated poultry industry and many
other vertically integrated industries for the
consumer’s dollar.”
In addition to
federal antitrust laws like the Sherman and
Clayton Act, meat packers are also subject to
the Packers and Stockyards Act, a statute
unique to the meat industry. “To my
knowledge, there is no other sector of the U.S.
manufacturing or service economy in which
government plays such a watchdog role with
respect to raw material suppliers,” Boyle
said.
According to Boyle, consumers want
consistent product quality at the lowest
possible price. Consumer demand has led to
fewer and larger retail chains in fields as
diverse as home improvement, video rentals,
food and consumer products and fast food.
“Just ask anyone who supplies
products to Wal-Mart or McDonalds what this
means: it means you must meet their standards
or you can’t sell to them,” he said.
“This is the way business is done today –
and the meat industry should be no
exception.” Iowa-based Winnebago and Maytag
are two examples of companies that have used
vertical integration to provide high quality
products, he noted, as is Gateway computers,
founded by an Iowa cattleman.
Boyle told
lawmakers that the meat industry has done many
things – including increasing coordination
with livestock producers and even owning some
livestock -- to ensure that meat products meet
consumer expectations. As a result of strategic
alliances, packers today sell beef that is 27
percent leaner than it was in the 1980s and
pork that is 31 percent leaner. Coordination
and vertical integration also have created beef
and pork products that are increasingly
convenient and consistent, and many are
value-added with features like marinades and
sauces added to fresh, branded
products.
Consumers spend far less of
their disposable income on meat than they did
30 years ago, according to Boyle: 1.9 percent
of disposable income, compared to 4.1 percent
in 1970. “This is a trend of which we are
proud – and one that provides consumers a
distinct benefit,” he said. We should not
rush to undo the foundations of this success
without understanding the ramifications for
everyone involved.”
In addition to the
many benefits to consumers, contracted sales
between packers and producers also are a
valuable risk management tool, Boyle argued.
“The benefits to farmers were perhaps most
vivid during the hog market crash of 1998, when
spot market prices for an unanticipated
over-supply of hogs dropped to as low as $9 per
cwt. Those hog farmers with contracts had
locked into much higher prices for their hogs
– generally $35 and more per cwt – and were
protected from the low market prices,” Boyle
said. “Packers with contracts, on the other
hand, were obviously paying far over the market
value for their hogs at the time. Both parties
to the contract, however, benefited from the
certainty provided by a steady, consistently
priced, contracted supply of hogs.”
A
complete copy of the testimony is available at
http:://www.meatinstitute.org.
AMI
represents the interests of packers and
processors of beef, pork, lamb, veal and turkey
products and their suppliers throughout North
America. Together, AMI's members produce 95
percent of the beef, pork, lamb and veal
products and 70 percent of the turkey products
in the U.S. Headquartered in Washington, DC,
the Institute provides legislative, regulatory,
public relations, technical, scientific and
educational services to the industry. Its
affiliate, the AMI Foundation, is a separate
501(c)3 organization that conducts research,
education and information projects for the
industry.
MEAT INDUSTRY OPPOSES EFFORTS TO MAKE MODERN BUSINESS MODEL ILLEGAL FOR MEAT PACKERS
Tuesday, July 16, 2002
For more information
contact:
Janet Riley Vice President, Public Affairs 703-841-2400 jriley@meatinstitute.org |
Josee Daoust Manager, Public Affairs 703-841-2400 jdaoust@meatinstitute.org |

