Non-Fed Packer Concentration
Termed Significant Regionally

ABILENE, Texas — Packer concentration continues to be a hot topic for beef producers. Most of the focus has been on the fed rather than the non-fed sector of the industry, but the latter category is drawing attention as well.

Recent acquisitions in the non-fed sector, particularly IBP’s purchase last spring of the Vernon Calhoun cow slaughtering facility in Palestine, Texas, have raised concerns among producers.

It was the second non-fed slaughter acquisition by the nation’s biggest packer, and the company generated more concern by campaigning for producers to deliver cull cows direct. They are to be paid on a rail basis, at a carcass price set by the packer.

IBP had already become the number one cow killer in March 1994 with its acquisition of Western Packing and Gibbon Packing, which preceded the Calhoun purchase. Steve Kay’s Cattle Buyer’s Weekly reported in its August 5 issue that IBP’s latest acquisition boosted its daily capacity to 4050 head at four plants. CBW estimated that IBP’s cow beef sales this year will exceed $500 million.

As of August, CBW said, ConAgra Fresh Meats, a subsidiary of ConAgra Inc., was the second largest processor with an estimated capacity of 3100 head at three plants. ConAgra was followed by Rosen’s Diversified, at Fairmount, Minn., and Taylor Packing Co., Wyalusing, Pa. Over the last three years, the newsletter calculated, slaughter capacity at the nation’s four largest cow-killing plants has increased by 20 percent.

That situation prompted the Texas and Southwestern Cattle Raisers Association to petition Texas A&M University to study current concentration levels in the non-fed beef packing sector. Texas A&M University economist Dr. Ernie Davis reported the study’s findings at the recent Texas and Southwestern Cattle Raisers Association board of directors meeting here.

Davis told listeners that the percentages on a nationwide basis were not yet alarmingly high, but he stressed the need to monitor the situation. He also noted that on a regional basis the picture looks dramatically different. Regionally, Davis said, concentration levels were well over 60 percent.

Slaughter data was gathered from cow slaughter plants in 10 regions across the state.

In 1993 and 1994 the four largest firms in the U.S. controlled 27 percent of the total cow and bull slaughter while the 20 largest firms controlled 69 percent; of those 20, about 13 were single-plant firms, Davis said. In 1994, however, controlling interest by the 20 largest firms went from 69 to nearly 71 percent. Eleven of the 20 were still single-plant firms.

From 1995 to 1996, primarily because of acquisitions, controlling interest by the big four packer cow facilities jumped from 27 to 30 percent.

Regionally, the big four control more than 60 percent of total cow slaughter. In region six, where Texas is located, Davis said, the four largest packers control about two-thirds of the cow kill.

Davis told the group that he expects to see increased concentration because of the economic incentive. U.S. packers, he said, are the most efficient in the world.

"There are some advantages of being big," Davis continued. "Bigness helps them become industrialized within their structure, which makes new technology available at a lower cost, which allows them to be more competitive in the international arena.

"We want the efficiencies," Davis added. "It’s not American to say that you can’t be big. What we want to do is make sure they’re playing the game fairly."