Meat Packing Plants

SIC 2011

Industry report:

This industry includes establishments primarily engaged in the slaughtering (for their own account or on a contract basis for the trade) of cattle, hogs, sheep, lambs, and calves for meat to be sold or to be used on the same premises in canning, cooking, curing, freezing, and in making sausage, lard, and other products. The industry also includes establishments primarily engaged in slaughtering horses for human consumption. Businesses primarily engaged in slaughtering, dressing, and packing poultry, rabbits, and other small game are classified in SIC 2015: Poultry Slaughtering and Processing. Those primarily engaged in slaughtering and processing animals not for human consumption are classified in SIC 2048: Prepared Feeds and Feed Ingredients for Animals and Fowls, Except Dogs and Cats. Businesses primarily involved in manufacturing sausages and meat specialties from purchased meats are classified in SIC 2013: Sausages and Other Prepared Meat Products.

Industry Snapshot

Meat packing is one of the largest agriculture-based industries in the United States. However, in recent years, changing consumer eating habits have impacted the beef and pork industries, which are by far the largest sectors in this industry category. Rapid and widespread consolidation within the industry has placed hog and beef meat packing under the control of just a handful of larger players. Operating on very thin margins, processing plants are under constant pressure to keep costs low and volume high.

According to the Annual Survey of Manufacturers, the total value of production for all meat types was $72.5 billion in 2008. Beef, not canned or made into sausage, was valued at $41.5 billion. Meat processed from carcasses generated $35.8 billion in 2008. Pork slaughtering was valued at $18.3 billion in 2008. Shipments for veal, not canned or made into sausage, totaled $359 million in 2008. Lamb and mutton, not canned or made into sausage, had a value of $345 million.

In 2009, U.S. commercial slaughter fell to 33.3 million head, while total U.S. beef consumption fell to 26.9 billion pounds. The total value of beef production in 2007 was $73 billion.

In addition, there were 944,200 commercial calf, 113.6 million hogs, 2.52 million sheep and lambs slaughtered in 2009. As of January 1, 2010 there were 934 federally inspected slaughter and processing plants, with the majority in Pennsylvania, Texas, and Montana.

Organization and Structure

The American Meat Institute (AMI) represented about 1,000 companies that processed 70 percent of the nation's meat and poultry, as well as the suppliers for those companies. The meat packing plants that processed beef cattle, hogs, and sheep into food and nonfood products ranged in size from those handling small numbers of livestock to operations processing millions of animals a year. About 900 slaughter and processing plants were federally inspected in the late 2000s, and over 2,000 were instead subject to state inspection or custom-exempt.

According to the USDA, the U.S. meat and poultry industry is spread among all fifty states. Iowa, Kansas, Nebraska, and Texas accounted for 52 percent of the United States commercial red meat production in the late 2000s.

Background and Development

The colonial farmers of New England, who were the first meat packers in the United States, used salt to preserve meat. As the nation expanded westward, slaughterhouses were built near population centers so meat could reach the table before it spoiled. The livestock herds were driven overland or barged to these early packing plants. So many hogs were slaughtered in Cincinnati, Ohio, that the city was called "Porkopolis."

For sanitary reasons, meat packing operations could be carried out only during the cold winter months, with ice used for refrigeration. The development of mechanical refrigeration and refrigerated railroad cars in the second half of the nineteenth century changed this. From late 1865 until the 1920s, Chicago, a hub city for the railroads, became renowned for its array of stockyards that collected and slaughtered livestock, often under harrowing working conditions.

With the turn of the twentieth century came mechanized disassembly and conveyor procedures in the plants, and the 1950s saw major improvements in plant sanitation and packaging. By the 1980s, the meat packing industry had again dispersed. Slaughterhouses moved closer to the feedlots where the animals were raised. Not having to ship them long distances reduced the stress, weight loss, and injury to the animals that was the inevitable effect of long journeys in crowded cattle cars and trucks.

Regulations.
Under the 1906 Meat Inspection Act, U.S. pre- and postmortem inspection of meat entering interstate and foreign commerce became mandatory. Meat to be used entirely within a single state may be inspected by that state's agriculture department. The federal program was conducted by the Food Safety and Inspection Service (FSIS) of the USDA. During the late 1980s and throughout the 1990s, unfavorable media criticism of the inspection system spurred an overhaul of FSIS procedures.

Outbreaks of E. coli bacteria and lysteria resulted in several deaths and millions of dollars in meat recalls during the 1990s. This led to increased scrutiny of the federal meat inspection program and fostered the Pathogen Reduction and Hazard Analysis and Critical Control Points (HACCP) rule instituted in 1996. This required the industry to update its inspection methods, which had changed little in the previous 50 years. From 1996 to 1999, new inspection plans were initiated, with all raw meat and poultry products being inspected using methods capable of detecting invisible pathogens by January 2000. The meat industry also continued to promote safe meat handling practices in the home through consumer education programs, labeling, and advertising.

Slaughter.
The desirability of stunning animals prior to slaughter was recognized in both Europe and the United States before the end of the nineteenth century. The practice became mandatory in the United States in 1960 with the passage of the Humane Slaughter Act. The act requires that before being slaughtered, animals must be rendered unconscious by mechanical, electrical, or chemical means in order to cause the animal a minimum of excitement or discomfort. Captive-bolt pistols or pneumatic guns may be used on cattle. Pistols, electric shock, or anesthetization in a carbon dioxide chamber is allowed for sheep and pigs. Compressed-air stunners and gas chambers for smaller animals came into use after World War II. Exceptions to federal requirements are made for ritual slaughters that satisfy the requirements of a particular faith. In kosher inspection, for example, a member of the Jewish faith cuts the throat and bleeds the animal without first stunning it and then examines it for abnormalities before approving it for food use.

After stunning, cattle are suspended by one or both hind legs, while the carotid arteries and jugular veins are cut. Hides are then removed by an automated process. A straight cut opens the center of the belly to remove the viscera. Next, the carcasses are split down the center of the backbone. Beef carcasses might then be shrouded, a procedure in which the carcasses are cooled for 24 hours after being tightly wrapped in muslin that has been soaked in warm water. The carcass fat is smooth and trim when the shroud is removed. Specialty meat items like the brains, kidneys, tail, tongue, and sweetbreads do not accompany the carcass but are an important income source for packers. The procedures for veal carcasses are similar, except that the hides are left on during chilling. Veal carcasses have very little fat and would shrink during chilling if the hides were removed.

In hog slaughter, the animals are bled after stunning by severing a large vein. The carcasses are then submerged in hot water to loosen the hair. After the removal of the hair, the carcass is eviscerated, split, and chilled.

Grading.
While meat inspection is mandatory, grading is a voluntary program. Funded by fees paid by the packers, the service is offered by the USDA's Agricultural and Marketing Service. Grading establishes uniform trading standards and helps to determine the value of various meat cuts. Meat carcasses are graded by both quality and yield.

The quality grades for beef are prime, choice, good, standard, commercial, utility, cutter, and canner. Carcass characteristics that determine the grade include marbling (the streaks of fat in the lean portions), the color and texture of the lean, and maturity. Consumers tend to interpret grading as an indication of taste and tenderness, although it was not designed for this purpose. Growing consumer perceptions that lean meat is healthier have increased the demand for lower-fat grades. The ratio of usable meat to bone and fat determines a carcass' yield grade. Combined with the quality grade, it is used to establish the monetary value of a carcass.

Working Conditions.
The slaughterhouses of the United States in the early twentieth century were grim and dangerous places to work. Low wages coupled with unsafe conditions made the stockyards of Chicago and other cities hazardous work sites. But it was not until reports on conditions there grew widespread--thanks in part to Upton Sinclair's novel The Jungle, which depicted in chilling detail the deplorable environment of the stockyards of Chicago--that the government turned its attention to the industry. Slaughterhouse conditions furthered the cause of fledgling unions, which grew in strength over the ensuing years.

At the end of the twentieth century, automation had not replaced manual labor and the extensive use of sharp knives and other hand tools. Workers were still lifting and lugging heavy carcasses, abattoir floors were slippery, and workers suffered from exposure due to the need for continuous refrigeration systems. Despite American Meat Institute (AMI) and Occupational Safety and Health Administration (OSHA) guidelines, 36 percent of meat packing employees are injured on the job each year. The meat packing industry still has the highest injury rate of any U.S. industry. As long as there is no economical and reliable cutting machinery that can accommodate the physical variety of animal carcasses, processing will continue to be a manual operation.

In the early 1990s, the industry's rate of cumulative trauma disorders (CTDs) was higher than all other manufacturing industries. The illness usually took the form of carpal tunnel syndrome, in which repeated, rapid, and forceful motions pinch and compress the nerve that runs through the wrist to the hand. Lower back and various tendon disorders also were reported. Underreporting of injury and illness remains a chronic problem as the majority of the meat packing workforce is comprised of illegal aliens.

Two of the nation's largest meat packers, IBP Inc. and John Morrell, were cited in 1987 by OSHA for underreporting or failing to record injuries and illnesses. Both companies contested the OSHA fines, which were greatly reduced. More importantly, OSHA recognized that the CTDs plaguing meat industry workers needed new solutions. In 1990, OSHA issued its first ergonomic guidelines after consultation with the AMI and labor groups. The guidelines emphasized worker training in proper techniques, strengthened by refresher courses, and the importance of reporting CTD symptoms early to prevent permanent injury. Medical management by trained health care providers was another program component.

OSHA offered special incentives to meat packers who entered into voluntary agreements with the agency to lessen their ergonomic hazards. While they would still be subject to OSHA inspections, they would not be cited or penalized on ergonomic grounds. Opinions on OSHA's voluntary guidelines were mixed, and industry critics did not always agree. Phillip L. Immesote, president of the United Food and Commercial Workers Union, testified at a hearing of the House Employment and Housing Subcommittee that OSHA was about to repeat earlier disastrous experiences with "a new program of exemptions and voluntary compliance in the nation's packing houses."

By the end of the 1990s, injuries were slightly lower in the major plants, although the industry was still plagued by the problem. In November 1999 OSHA proposed new guidelines to address repetitive stress injuries in the workplace. These guidelines again focused heavily on ergonomic accommodations. While not specifically aimed at the meat packing industry, they could have an impact. Industry opposition to the guidelines was high, and it remains to be seen if the guidelines will be enacted by Congress.

Per capita meat consumption (red meat and poultry) increased from 190.7 pounds in retail weight in 1982 to 221.2 pounds in 2006. Red meat consumption has slowed from a high of 136.7 pounds in 1980 to 116.7 pounds in 2006.

Beef.
Meat processors have sought to improve their business outlook by expanding into the fast-growing poultry market. The number of major meat producers also engaged in production of poultry products rose dramatically throughout the 1990s. The beef industry began heavily advertising beef as a healthy, easy-to-prepare dinner meat, as in its "Beef Made Easy" campaign, which featured low-fat, easy-to-prepare menu options. In addition, the beef industry began to market beef as a brand, rather than a generic meat, in order to boost demand.

Enhanced genetics, the introduction of new feed additives and growth stimulants, and nutritional advances all played a part in the improvements in cattle growth rate during the last quarter of the twentieth century. Consumer demand for lean beef, as well as environmental concerns, were expected to continue to have an impact on the beef industry into the twenty-first century.

Pork.
Nationwide, the number of hog enterprises dwindled toward the end of the 1990s, as did the number of slaughtering facilities. Many of the smaller operations dropped out, while the larger outfits expanded. For pig-slaughtering operations, this reduction and consolidation of sources adversely impacted the industry, despite a 10 percent increase in production.

In the mid-1990s, the National Pork Producers Council announced a comprehensive plan to promote pork as the meat of choice both domestically and worldwide. The plan was the joint output of the National Pork Board, the National Live Stock and Meat Board's pork section, and hundreds of producers. Goals included building demand for pork by creating new products and expanding current uses; ensuring that pork met or surpassed consumer expectations of safety, quality, and value; and positioning the industry as socially responsible.

Whether the potential for larger herds and increased production could be parlayed into industry growth was dependent on other factors, such as cost competitiveness, exports, and the continued popularity of pork products. During the late 1990s, the industry experienced record high production, consumption, and exports, and record low prices for live hogs. Pork producers were the most severely impacted, suffering $2.5 billion in losses in 1998 and $1.0 billion in losses in 1999. The pork industry continued to consolidate and move south and west, away from the traditional midwestern hog states. Efforts were made to align production and packing facilities to avoid the problems suffered in the late 1990s due to a lack of capacity at slaughter facilities during peak production times. Nationally and internationally, demand for pork continued to rise at record rates.

In recent years, the meat packing industry has undergone changes in its character and become extremely consolidated. Significant losses occurred during the early 1980s, with more than 30 plants shutting down. In the aftermath, several new industry leaders emerged, including Tyson, ConAgra, and Cargill. These companies moved meat packing plants away from urban areas, which were home to well-organized unions, to rural communities. Traditionally, animals were slaughtered in urban plants, and animal quarters were shipped to skilled butchers who prepared the meat for market. During the 1980s and 1990s, slaughtering was automated and restructured to focus on the entire process within one plant, using rapidly moving disassembly lines. Meat was then packaged, boxed, and shipped directly to the customer.

Rapid consolidation put the control of 80 percent of the beef slaughter industry and 60 percent of the hog slaughter industry into the hands of Tyson, ConAgra, and Cargill. The top five beef companies (Tyson, Excel, Swift, Farmland, and Smithfield) around the turn of the twenty-first century controlled 89 percent of steer and heifer slaughter. Despite the large revenues of these companies, the profit margin remained precariously thin, with expected profit levels running around two percent. As a result, meat processing companies look to cut costs and maintain the lowest possible operating expenses.

Meat safety was one of the major concerns affecting this industry in the mid-2000s. According to the USDA, there are around 446,000 high-risk animals slaughtered every year. Bovine spongiform encephalopathy (BSE), commonly called mad cow disease, a fatal central nervous system disease in cattle, was not found until 2003 in the United States. At the end of that year, a BSE diagnosis was confirmed in a cow in Washington state, shaking the beef and meat packing industries. The USDA subsequently announced plans to spend $70 million on new testing systems to test more than ten times the normal number of regularly tested cattle. Nonetheless, many of the major consumers of U.S. beef shut their borders to new shipments. In 2003, export values had been $3.9 billion, but the number dropped substantially after the BSE announcement: in 2004, export values plummeted to $605 million. However, international trade rebounded slightly the next year as nations lifted their ban on U.S. meat. According to the National Cattlemen's Beef Association, BSE caused an industry decline of an estimated $3 billion.

Current Conditions

As of October 1, 2007, the U.S. Department of Agriculture's Food Safety and Inspection Service (FSIS) prohibits the slaughter of cattle that are not able to stand or walk, also known as 'downer" cattle. This ruling is a continuation of the interim rules put in place that stemmed from the original 2003 BSE case. If a cow cannot stand on its own at the time of inspection, there is a strong possibility the cow may test positive for BSE. That followed with the USDA finally lifting the ban on older live Canadian cattle born on or after March 1, 1999, and beef products from the older cattle after four years of restricted trade in November 2007.

Elsewhere, the U.S. beef industry celebrated a milestone during the first seven months of 2008 when beef exports had a higher value than imports, the first year in five. According to the National Cattlemen's Association, beef and beef product exports grew 37 percent between January and July 2008 compared to previous year. More importantly, July marked the largest export month since the pre-BSA period.

According to another article published in Sioux City Journal, in February 2010, "Following two money-losing years, hog producers have been culling their herds, leading to shrinking supplies." In effect, one industry leader, Smithfield Foods announced the closure of its John Morrell & Co. pork plant in Sioux City, slated for April 2010, blaming falling hog supplies. The plant itself was built in the 1950s and the need for its modernization helped to make the decision. The company had plans to rebuild; however, when the credit crisis surfaced, it was never realized. The company reported a loss for four consecutive quarters, but anticipated a turnaround by cutting costs and increased hog prices.

Industry Leaders

Competition for the number one spot in the meat packing industry was strong, but South Dakota-based Tyson Foods, Inc., (formerly IBP Inc.) led with revenues of $26.7 billion and 117,000 employees in 2009. Tyson touted itself as the world's largest producer of fresh beef, chicken, and pork.

As IBP, the company acquired Foodbrands America Inc. in early 1997. During the late 1990s, IBP also continued to grow its value-added meat products (deli meats, pizza toppings, frozen appetizers, etc.) and acquired Russer Foods, H&M Food Systems, and Thorn Apple Valley, all smaller players in the meat market.

By relocating its slaughterhouses in 1961 to where the beef was, near Nebraska's and Iowa's cattle farms, IBP changed the meat packing industry. At the company's plant in Dakota City, Nebraska, animal carcasses were carried over more than 20 miles of conveyor systems. Within 48 hours, a 650-pound carcass could be broken, cut, and packed into 65- to 80-pound boxes for shipment to supermarkets. Pork became an important part of IBP's success starting in 1976, and by the late 1980s the company planned six plants in Iowa and Nebraska, all within a 100-mile radius of the nation's largest hog-producing area. Tyson, as IBP has now become, continues to shift plants and production to areas that offer the most strategic advantage to the meat markets. In the early 2000s the company had operations in the United States and eight foreign countries.

Other industry leaders were Smithfield Foods of Smithfield, Virginia, the world's largest pork processor and hog producer, with $11.2 billion in 2010 revenue; Hormel Foods Corp. of Austin, Minnesota, with $6.5 billion in 2009 revenue; and Seaboard Corp. of Shawnee Mission, Kansas, with $3.6 billion in 2009 revenue.

Workforce

In 2007, the U.S. Department of Labor reported 146,400 workers employed in the meat packing industry, of which 128,100 were production workers. In the food industry as a whole, meat packing and processing is the largest employer.

As a result of the need to keep expenses low, the meat packing industry has been a longtime opponent of workers' unions and paid well below the national average. Employing recent immigrants has become standard practice. According to David Bacon in The American Prospect, "Today, Spanish is the language on the floor of almost every plant. Most workers come from Mexico, with smaller numbers from Central America. Refugees from Bosnia, Vietnam, and even the Sudan are a growing presence in some areas, but the vast majority of meatpacking workers are Latinos." During the late 1990s and early 2000s, the meat packing industry received negative publicity for its employment of illegal aliens, as well as its dangerous and low-paying working conditions.

Meat packing also is a highly labor-intensive industry, and a large majority of the total employees (84 percent) were production workers, compared to 72 percent in all food preparation sectors and 67 percent in all manufacturing industries. Because of the industry's low wages and demanding working conditions, employee turnover remains high.

America and the World

Despite lingering effects of BSE-related trade restrictions for beef, pork exports have continued to climb. In 2008, pork exports increased 71 percent compared to the previous year. The leading five markets for exported U.S. beef and veal in 2009 were Mexico (180,782 metric tons), Canada (130, 295 metric tons), Japan (81,345 metric tons), Taiwan (26,842 metric tons), and Hong Kong (22,835 metric tons).

Both U.S. pork and beef exports were robust during the first half of 2010 following a stellar month in June. Pork exports increased 24 percent in June 2010 compared to the same time a year earlier. In terms of value, pork exports were up 34 percent to $314.4 million, as was exported beef to $377.6 million.

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News and information about Meat Packing Plants

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