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HISTORICAL DEVELOPMENT OF THE U.S. LIVESTOCK MARKETING & MEAT PACKING INDUSTRIES

HISTORICAL DEVELOPMENT OF THE U.S. LIVESTOCK MARKETING & MEAT PACKING INDUSTRIES. MARKETING METHODS. BARTER - Exchange of goods and/or services. PRIVATE TREATY - Direct negotiation between buyer and seller. Still widely used today.

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HISTORICAL DEVELOPMENT OF THE U.S. LIVESTOCK MARKETING & MEAT PACKING INDUSTRIES

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  1. HISTORICAL DEVELOPMENT OF THE U.S. LIVESTOCK MARKETING & MEAT PACKING INDUSTRIES

  2. MARKETING METHODS • BARTER - Exchange of goods and/or services. • PRIVATE TREATY - Direct negotiation between buyer and seller. Still widely used today. • PUBLIC AUCTION - Auctioneer accepts competitive bids from buyers and conducts sale.

  3. MARKETING METHODS • TERMINAL MARKET - Commission firm represents seller and receives a commission for negotiating sale and selling terms. • DIRECT MARKETING - Sale may be negotiated by private treaty or by commission firm before livestock moves directly from farm to packing plant

  4. COLONIAL AMERICA • Early settlers bartered livestock and products for other necessities. • Since wild game was plentiful, early livestock was used for draft and milk. • Only after production ceased were they harvested for meat, hides, tallow and other byproducts.

  5. COLONIAL AMERICA • Livestock produced close to consumers and many sales were direct to butcher or retail market. • Most home slaughter was done in winter since refrigeration did not exist. • Excess meat was preserved by smoking, salting or pickling and“packing” in barrels. This is the origin of the term “meat packer”.

  6. COLONIAL AMERICA • As settlements expanded westward from the east coast, it became necessary to “drive or herd” the livestock back to the eastern population centers. • Many of our present east - west highways began as livestock trails. U.S. Route 40 is an example

  7. COLONIAL AMERICA • First commercial meat packing plant was established by William Pynchon in Springfield, MA in 1662. • As distance from farms to markets increased, livestock dealers became important as drovers who worked for a commission to market the livestock. It was a high risk profession to buy and deliver the livestock.

  8. MARKETING IN THE 1700s • In 1756, the market in Brighton MA, near Boston became the first public auction market. • Following the War of Independence, livestock production expanded westward into the fertile Ohio river valley. • Cincinnati, Ohio became known as “Porkopolis”. Meat and livestock moved down the Ohio & Mississippi rivers.

  9. MARKETING IN THE 1800s • New England became industrialized, the southern states specialized in cotton and the “Corn Belt” became the center for grain and livestock production. • Canals, roads and railroads were built to move meat and livestock back to the eastern cities. • By the mid 1800s, Chicago emerged as the dominant livestock assembling center.

  10. MARKETING IN THE 1800s • The first livestock commission firm began in Chicago in 1857. • In 1865, the Illinois legislature incorporated the Union Stockyards and Transit Company • Packing plants were soon built surrounding the Chicago Stockyards. • Soon, terminal markets were established in East St. Louis, Kansas City, Omaha, etc.

  11. MARKETING IN THE 1800s • Prior to the Civil War, cattle ranching in Texas expanded dramatically. • When the coastal markets were blockaded during the war, the cattle were trailed to the railroad towns of Abilene, Wichita and Dodge City, KS, to be shipped to Chicago. • The “cowboy” era and trail drives ended about 1880.

  12. INVENTIONS CHANGE THE LIVESTOCK INDUSTRY • Barbed wire was invented in 1873 - Native prairies and range land could be managed. • Windmill was adapted to range land - Cattle and sheep did not have to be near streams. • Refrigerated rail cars - Meat could be processed close to production units and shipped to large population centers.

  13. MARKETING IN THE 1900s • Mechanical refrigeration was well established by 1890 and meat packing became a year around business. • By 1903, five major meat packers emerged - Swift, Armour, Cudahy, Wilson & Morris. • The Packer & Stockyards Act of 1921 provided market regulation and oversight by USDA.

  14. MARKETING IN THE 1900s • Central terminal markets remained dominant until after World War I. • The USDA Federal Meat Grading Service was set up in 1926 to grade beef carcasses. • Establishment of a market news reporting service and an improved highway system enabling the use of trucks to transport meat brought change to the industry.

  15. MARKETING IN THE 1900s • By the end of World War II, the packing plants moved closer to the production areas, terminal markets declined and direct marketing increased. • In 1970, the Union Stockyards stopped accepting hogs and in 1971, trading in cattle and sheep also stopped.

  16. AUCTION MARKETS • Originally were used more for feeder livestock and cull breeding animals than for finished slaughter livestock. • Increased as the terminal markets declined and have remained fairly stable. • Future is uncertain except for breeding livestock and horses.

  17. FEDERAL LAWS REGULATING MEAT • 1906 - The Meat Inspection Act provided for inspection for wholesomeness, freedom from disease and adulteration. • 1958 - The Humane Slaughter Act. • 1967 - Wholesome Meat Act extended meat inspection to products in interstate trade. • 1990s - Hazard Analysis of Critical Control Points (HACCP).

  18. MEAT INDUSTRY TERMINOLOGY • Slaughter, process & harvest are synonyms. • Ante-mortem = Pre-harvest. • Dressing percentage = (Carcass Weight / Live Weight) x 100 • Sheep = 50% • Cattle = 60% • Swine = 72% • Poultry = 78% to 83%

  19. MEAT INDUSTRY TERMINOLOGY • Drop, offal, viscera or by-products are terms used to describe the parts removed from the carcass (head, hide, hair, shanks & internal organs). • “Kosher” refers to meat from animals slaughtered under procedures approved by Orthodox Jewish Law.

  20. LARGEST MEAT PACKERSBEEF 2000 • IBP - Iowa Beef Processors (div. Of Tyson) • $ 9.3 billion in beef sales • Excel - (division of Cargill Inc.) • $ 7.0 billion in beef sales • ConAgra Beef • $ 6.0 billion in beef sales • Farmland - $ 2.8 billion in beef sales • Smithfield - $ 2.3 billion in beef sales • These top 5 companies harvest 85% of the steers and heifers processed in the U.S. each year.

  21. LARGEST MEAT PACKERS PORK 2000 • Smithfield Foods processes 18.8% of U.S. pork processing. Largest hog slaughterer with daily capacity of 78,500 head. • IBP has 17.6% of U.S. pork processing. • ConAgra has 10.5% • Excel has 9.7% and Farmland has 8.0% • These top 5 companies harvest 65% of the U.S. pork production.

  22. LARGEST MEAT PACKERS POULTRY 1999 • Tyson Foods (AR)- $ 7.5 bil. in sales • Perdue Farms (MD) - $ 2.5 bil. in sales • Gold Kist (GA) - $ 1.6 bil. in sales • Pilgrim’s Pride (TX) - $ 1.3 bil. in sales • Foster Farms (CA) - $ 1.1 bil. in sales

  23. PER-CAPITA CONSUMPTION RETAIL WEIGHT 2000 • BEEF 64.4 lb. • VEAL 0.5 lb. • PORK 47.7 lb. • LAMB 0.8 lb. TOTAL RED MEAT 113.5 lb.

  24. PER-CAPITA CONSUMPTION RETAIL WEIGHT 2000 • CHICKEN 52.9 lb. • TURKEY 13.6 lb. TOTAL POULTRY 66.5 lb. TOTAL RED MEAT & POULTRY 180.0 lb.

  25. PER-CAPITA SPENDING 2001 BEEF, PORK & CHICKEN • BEEF $213.43 47.0% • PORK $135.26 28.5% • BROILER $116.39 24.5% TOTAL $ SPENT $ 475.08

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