Markets for meats have coped with major developments during the past twenty years, both from the standpoint of supply and that of demand. As a matter of fact, they markets have experienced a process of concentration of players––a situation outlined in a recent study1
conducted by the FranceAgriMer organization––as well as a strong consumption growth in emerging nations. These developments contributed to give an increasingly strategic weight to the meat sector. Nevertheless, such structural changes are not without risks for the future and might, in the end, lead to increase the already strong tensions in international agricultural markets.
The meat sector is rapidly expanding. In fact, the global meat trade grew by 57 percent between 2000 and 2010. During the same time, global demand only increased by six percent, most of it generated by emerging countries such as China and South Korea (a 20 percent increase between 2000 and 2010) or Russia (a 50 percent increase for the same period), nations for which growth margins are still significant. In contrast, consumption in the US and the EU remained stable, or even declined.
In such an environment, the structure of meat markets has been altered and businesses active in the industry adapted their strategies. They strove to develop so as to reach the critical size by further internationalizing activities to diminish and protect distribution channels, in addition to reaping the benefits of currency exchange rates or of labor costs and livestock feed disparities.
Consequently, these companies completed numerous mergers and acquisitions leading to a massive concentration of the industry and the formation of global giants. The trend first concerned the United States in the early 1990s, Brazil in the 2000s, and more recently China. Large corporations––such as Smithfield Foods, Tyson Foods and Cargill in the United States, JBS, Marfrig and Brasil Foods in Brazil, or Shuanghui, People’s Food and Nanjing Yurun Food in China––have established leadership positions over time.
First specialized in a single industry and operating at the national level, these firms became genuine multinationals active in various types of livestock production and in different continents. Tyson Foods is a perfect example of this development. Established in 1935 and first specialized in poultry marketing, the firm gradually invested in the hog and beef sectors. With 2010 sales of $28 billion, Tyson Foods now operates production facilities outside the US and exports to 100 countries.
Chances are that the disorders now seen in the meat sector will continue in 2012, or even intensify due to the combination of two factors: On one hand the emerging countries’ growing demand that is expected to increase, and on the other the tensions recorded in grain markets––the “upstream” market for meats––tensions that are probably bound to linger in an environment of increasing financialization.