The U.S. Pork and Beef Sectors: Divergent Organizational Patterns, Paradoxes and Conflicts

John D. Lawrence and Marvin L. Hayenga

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: The vertical coordination systems between livestock producers and processors have dramatically shifted toward long-term contract coordination or vertical integration in the pork sector; however, fed cattle producers still rely heavily on spot market or short-term contract linkages with meat packers. Concerns about the negative influences of contracts-enhancing packer market power and causing lower prices for independent producers-have clearly been much more strident in the beef industry. We postulate that the large size of pork producers in the Southeast and few processors available there, the greater specific investments for pork producers and branded pork processors, and the beef industry's greater length and breadth of the multiple stage supply chain and later emphasis on brand merchandising programs provide the leading rationale for the different patterns of organizational change in these two industries. Related paradoxes-the great success of formula pricing contracts is likely to lead to its demise, and the concerns about contract linkages negatively affecting prices have been greater in the industry where there is less contracting.

Date: 2002-06-01
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