Meat Processors Purchasing and Sale Practices: Lessons Learned from the GIPSA Livestock and Meat Marketing Study

The meat value chain is a complex organization with multiple participants performing numerous value added functions. Perhaps the most complex and least well understood segment is that downstream from the packer, e.g., the processor, wholesaler, exporter, retailer and food service (or restaurant) operator. One portion of the Livestock and Meat Marketing Study provided an overview of marketing and pricing methods used in this sector and, in particular, the results of analyses of the relationship between use of alternative marketing arrangements (AMAs) and the distribution and sales of meat products downstream from the packer. The analyses include both beef and pork products, are descriptive and focus on the relationships among industry articipants beyond the packing plant. The information used includes the results of the industry interviews, data from the industry surveys, and transactions data from meat processors. Primary conclusions related to meat processing, distribution, and sales, are as follows: • Firms differ greatly in the sales, purchase, and pricing methods for meat. Firms rely heavily on the spot market but also use other methods. They also mix-and-match purchase and pricing methods, e.g., buying on the forward market, but pricing on a formula. • Meat processors play an important distribution role in the meat value chain by purchasing large lots from a few sources and selling small lots to many firms. • Packers sort cattle purchased under various marketing arrangements to meet the needs of its buyers, but aggregate transactions data suggest that downstream marketing arrangements have little or no relationship to cattle purchase methods or branded beef sales programs.