Vertical Integration in Beef Production Term Paper

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When they went into the state of Idaho, however, they changed their approach to sourcing cattle. In this area, there were fewer cattle in general' as a result, IBP purchase a minority interest in a feedlot.

Why did the firm acquire this upstream interest in Idaho and not in other states in the Great Plains?

The profits from feedlots in case with Idaho cattle would be not so high, compared to Middle East states, as the return would be relatively low on the area with fewer cattle.

PART TWO

In the 1990s and early 21st century, several meat packing firms sought to transfer the vertical integration techniques perfected by IBP in beef to the pork industry. Using the Internet, develop a flow chart of the activities in an economic system that takes a pig from its pen to the supermarket meat case. Once you have done this, continue your research so that you can answer the following question: Which activities have become vertically integrated in the pork business in the last 15 years and why?

The similar vertical integrated practices, which are observed in beef industry, are also common for pork industry, especially in such states as Iowa (as 32% of the nation's hogs were processed in this state). Due to the leading positions on national market Iowa's pork industry companies were in advantage and had a lot of opportunities for organizing vertically integrated production of pork. Three leading pork industry companies of the state had reorganized the core structure of the pork processing in the state, so that in a period of 5 years Iowa had turned from pork exporter to pork importer, as pork processing plants of Iowa had enough capacities for pork processing exported from neighboring states: Minnesota, Illinois, Oklahoma and Nebraska.

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Vertically integrated pork industry of Iowa is mostly represented by firms, which can be even called integrated food companies as they include: raising hogs, slaughtering and packing fabricates. In addition, most of them have distribution networks and their pork is branded. The development of vertical integrated pork industry can be supported by the following data: In 1987, 81.5% of the product left the plant as primal or fabricated products. By 1992, this number had risen to 92.2%

Making a conclusion it's important to note that in future decades there will be monopolization of the pork and beef industry in United States, as integrated processing is very profitable and it's share in the prime value of fabricated pork is about 10% only. The services of butchers at local stores are more expensive, which shows the main advantages of integration of pork processing. http://www.econ.iastate.edu/outreach/agriculture/livestock/pork/dollars_and_scents/chapter5/introduction.html

Vertical Integration in Beef Production

Packing plant

Slaughterhouse

Transportation to slaughterhouse

PEN

Pork at supermarket

Pork brand distribution service.....

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