THINKING THROUGH UNINTENDED CONSEQUENCES OF BREAKING UP PACKERS
By Don Close, Senior Animal Protein Analyst Terrain
There is a growing drumbeat to break up the four major packers and replace them with small regional packers. While all the attention is on the market power of the big four, there is little mention of the possible unintended consequences of breaking them up into smaller businesses. Market Power Would Shift to Large Retailers For one, large packers are needed to supply the major retailers where American consumers are filling their grocery baskets. The five largest retailers in the U. S.— Walmart, Amazon, Costco, Kroger and Target— represent only 7.46 % of actual stores but control an amazing 72.54 % of gross sales, according to Grocery Trade News. When the list of major retailers is expanded to the top 10, the percentage of total gross sales mushrooms to as much as 94 %.
These major retailers would control an even larger amount of market power if small, fragmented regional packers were fighting to gain access and negotiate with the major retailers. Product Consistency at Risk Driving the large retailers to work with more, smaller packers would also risk the consistency of products consumers have grown accustomed to and which has driven beef demand.
Over the last several years, beef demand has been nothing short of phenomenal. There is no dispute that the improvement in product quality and consistency has driven this exceptional demand. Consumers’ ability to buy the product they want, when they want, and to know the quality of their selection is consistent every time matters.
This would change if a retailer’ s supply were assembled from a fractured network of suppliers that each have their own production practices, specifications and limitations.
Price Considerations Over the last several years, beef exports have grown from low- to mid-single digits to now consistently in a range of 12 % to 14 % of domestic production, with the potential for additional growth. Keep in mind, a huge portion of exports are made up of offal and variety meats that aren’ t favorable to U. S. consumers.
Based on the USDA By-Product Drop Value Report, the value of hide and offal is around $ 220 a head for the items the report includes, and other items can contribute an additional $ 25 to $ 30. Large packers can participate in this export market because they have the volume needed of these odd products to have shippable mass. Smaller packers just don’ t have enough volume.
The majority of small regional packers are therefore forced to take dropcredit items to the landfill and pay a disposal fee. The combination of missed drop value and disposal fees adds up to $ 250 to $ 300 a head. Smaller regional plants can compete despite this disadvantage through specialization.
Important to consider: If that additional profitability weren’ t in the supply chain or if it were reduced due to higher logistical costs to amass shippable products for export markets, there would likely be an impact on the prices paid for fed cattle.
Let’ s think through the potential unintended consequences. Cattle markets are riding the crest of all-time record prices. Breaking up the big packers could destroy market efficiency, risk the product consistency consumers have come to expect, and surrender negotiating leverage with the large retailers.
Terrain is a team of economists who provide expert insights to the customers of AgCountry Farm Credit Services, American AgCredit, Farm Credit Services of America and Frontier Farm Credit. Learn more at Terrainag. com.
16 NOVEMBER 2026 www. NCBA. org