Where have all the packing plants gone? The new meat geography in rural America

Federal Reserve Bank of Kansas City - Economic Review, Third Quarter 1999 by Drabenstott, Mark, Henry, Mark, Mitchell, Kristin

The meat industry is an economic powerhouse for rural America-accounting for roughly one of every 16 rural manufacturing jobs. Moreover, this rural powerhouse is adding jobs at a fast clip, with recent growth of 8.5 percent a year versus just 1.2 percent a year for all rural manufacturing industries. Finally, rural America has captured a commanding 52 percent of all meat industry jobs, far above the level of a decade ago.

While all these figures are welcome news to rural areas eager to expand employment, geographic shifts under way in the industry raise fresh doubts over which rural communities will land new meat plants. Once concentrated in midwestern urban centers like Chicago, the meat industry is now most often found in rural towns and hamlets-and often far from the Midwest. Poultry processing has moved to the Southeast. Beef packing plants have moved to the Great Plains. And pork packing plants have begun moving out of the Corn Belt to the Southeast and Great Plains, but where they go next is highly uncertain, with the future location of hog production itself very much in question (Drabenstott).

What geographic shifts lie ahead for the meat processing industry? And what do the shifts in this powerhouse industry mean for the future of the rural economy? This article reviews some critical trends in the meat industry by examining for the first time a special database on the industry-the Longitudinal Research Database (LRD) maintained by the Bureau of the Census. The first section shows that the meat industry has moved to new regions over the past three decades, has concentrated to a considerable degree within those regions, and has consolidated in bigger plants. The second section considers what the trends mean for rural America. The article concludes that the meat industry is likely to concentrate geographically even more in the future, promising a new source of economic growth for some rural communities while leaving many others behind. Yet even in areas where the industry does locate, a sharp drop in industry wages raises new questions about its local economic impact.

THE MEAT INDUSTRY ON THE MOVE

The meat industry rarely attracts the attention that high-tech industries often command. Among the most basic of basic industries, meat processing lacks the technological wonder of Silicon Valley. Yet few industries are more important for rural America. In general, the service sector is growing more slowly in rural America than in metropolitan areas. That means rural communities put a premium on an expanding the rural manufacturing sector to provide new jobs and income. The meat industry is often a prime target in rural community development plans.

Food processing (SIC 20) is the biggest manufacturing industry in rural America, and meat processing is the single biggest food industry segment. As shown in Table 1, the meat industry accounts for approximately 50 percent of all rural food processing jobs. The meat industry has three separate components. Meat packing (SIC 2011) includes both beef and pork packing plants, and unfortunately the two cannot be disaggregated. However, examining where cattle and hog production has shifted does allow some inferences to be drawn. Processed meats (SIC 2013) includes plants that process sausage, "luncheon meats," frankfurters, and other processed meat items. Poultry processing (SIC 2015) includes plants that process chicken and turkey.

In terms of local economic impact, the meat industry does stand out as a key industry for rural America. Taken together, all categories of meat processing account for fully half of all food processing jobs in rural America. Meat processing plants buy more material input per plant (about $32.5 million in 1995) from local sources (defined as being within a one-hour drive of the plant) than any of the other eight sectors in the food processing group. Meat plants are also a big source of jobs. Poultry processing plants, for instance, employ more people at each plant (an average of 467 in 1995) than any other kind of food plant. While wages tend to be lower than in many other kinds of manufacturing, annual payrolls still average $7.0 million for poultry processing plants and $7.6 million for meat processing plants. When local purchases and payroll are taken together, therefore, meat and poultry plants together rank among the top four "high local economic impact" food industries (ERS).

For all its old-fashioned image, much is changing in the meat processing industry, and nowhere are these changes more evident than in the rural communities that increasingly are home to the industry. The industry is literally on the moveopening new plants near huge livestock production facilities and shutting down plants in more traditional locations. Even within regions, the industry is concentrating geographically, tracking a similar pattern in livestock production. Finally, the industry appears to be shifting to bigger plants, much like many other segments of the manufacturing sector.