Restructuring U.S. meatpacking as a resilience strategy against capacity disruptions: will it work?

ABSTRACT

To guard against future COVID-19 type capacity disruptions in the highly concentrated meatpacking industry, the U.S. government is embarking on a resilience strategy that expands the processing capacity of smaller meat processing establishments. Using a dominant-oligopoly competitive-fringe (DO/CF) model, and defining resilience as an equilibrium in which meat production continues undisrupted, I show that, in theory, resilience is achievable if DO prices meat competitively and shares the market equally with CF. Since the two conditions are unlikely to occur in practice, the resilience strategy is unlikely to work.

KEYWORDS:

• Supply chain resilience
• COVID-19
• meatpacking
• dominant oligopoly

JEL CLASSIFICATION:

• L11
• L13
• L66

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

¹ Conceptually, one could allow for differences by letting ${\hat{K}}_d=$ $\rho {\hat{K}}_f$ where $\rho$ is a positive factor of proportion.

² This is DO firm’s second-order condition (see Equation (5)(5) ${\pi }_{Y_d{Y}_d}=\left(1+{\delta }_{fd}\right)\delta \{2m^{\prime }+Y_{d}m{ }^{\mathrm{\prime }\mathrm{\prime }}\left(1+{\delta }_{fd}\right)+Y_{d}m{ }^{\mathrm{\prime }}{m}^{\prime \prime }\frac{c_f^{{ }^{\prime \prime }}}{k_f}\}-\frac{c_d^{{ }^{\prime \prime }}}{Y_d}<0$(5) ) under perfect competition, i.e. δ = 0.