PACKER PROCUREMENT CHANNELS FOR SLAUGHTER LIVESTOCK IN INDIANA
Research Progress Report 5 March 1962
Thomas T. Stout, Agricultural Economics Department
SUMMARY
Slaughter livestock sales provide Indiana farmers with over 40.0 percent of their farm income, and most of these sales are made to Indiana packers. This investigation of the farm-to-packer marketing channel for livestock is based on a sample of the 123 meat packing plants in Indiana. Sources and methods used in livestock procurement were studied in 62 plants.
A variety of procurement alternatives are available to packers. Most of the cattle and sheep and lambs are purchased by packer buyers at terminal markets. Local markets are an important source for slaughter hogs. Most veal calves come from auctions. When purchases are made at country markets, they are usually made through order buyers, traders or traveling buyers. Larger packers usually make full use of packer buyers, buying stations and other means that are an integral part of the company organization. Small packers deal more frequently with traders, order buyers and other methods that provide the procurement function in ways that permit costs to be regarded as variable rather than a part of overhead.
Factors other than plant size also contribute to the variety of procurement channels. Terminal markets were established at strategic points on a rail transportation network. Newer markets have attempted to locate strategically on highway systems while also generally avoiding close proximity to terminals. Some packers have relocated closer to shifting farm supply areas; some have remained close to terminals. Many
packers specialize rather than kill all species, and the various species frequently are concentrated in differeing areas of a region or a state. Basically, the industry is continuing to adjust to the revolution wrought by trucks and highways, and changes will continue until livestock marketing achieves a stability comparable to the one enjoyed by railroads and terminals 40 years ago.
INTRODUCTION
The marketing channel for slaughter livestock moving from farm to packing-house constitutes a major segment of the total marketing activity for Indiana farm products. Indiana is one of the leading states in livestock production, ranking 3rd among all states in production of hogs, 14th in cattle and calves, and 20th in sheep and lambs in 1960. V Each year, Indiana farmers market approximately 875,000 cattle, 150,000 calves, 425,000 sheep and lambs, and over 7,000,000 hogs. These sales, exclusive of interfarm sales, represent largely sales of livestock for slaughter, and from them Indiana farmers derive 40.0 to 45.5 percent of their total farm income 2/ (Table 1).
Most of these slaughter livestock are sold to the Indiana packing industry, represented by 123 meat packers who operate in
1/ "Meat Animals: Farm Production, Disposition, and Income, by States, 1959-1960, " Statistical Reporting Service, Crop Reporting Board, USDA April 1961.
2/ Income referred to here does not include government payments.
PURDUE UNIVERSITY • Agricultural Experiment Station • Lafayette, Indiana