International Market Concentration in the Southern Meat Trading Market

International trade is pivotal to the U.S. meat industry. Yet, firms that engage in international markets differ widely in terms of their foreign market participation. Using transaction-level bills of lading for meat firms in the Southern United States, we calculated the destination and source market concentration in the meat trading industry. We used the number of firms and their meat trade share to measure market concentration in the meat export and import markets from 2010 to 2020.

We find that more than 60 percent of meat exporters and importers are engaged only in a single foreign market, while only a few dominant firms participate in more than ten foreign markets. These firms account for 5 percent of all meat exporting firms while being responsible for more than 80 percent of meat exports. Their trade share has increased by 10 percent from 2010 to 2020. In contrast, the export share of firms exporting to less than four destinations decreased from 20 percent to less than 10 percent in that period. The meat import market is less concentrated and more stable over time. Meat firms importing from only one source market accounted for 9 percent of all meat imports in 2020, while that share is merely 3 percent in the meat export market. The import market concentration is significantly larger than in the export market. Fewer than 2 percent of firms export to 10 or more markets, while they accounted for a considerably smaller share of overall meat imports (47 percent) in 2020.

A potential explanation for the high market concentration in the meat trading market is that firms face fixed costs in serving foreign markets and need to recoup sufficient revenue to cover the high fixed cost of serving multiple markets. Smaller firms that are not profitable enough to cover these fixed costs are less likely to build foreign distribution networks. In comparison, larger firms benefit from economies of scale in their international distribution network. Therefore, the observed market structure is likely a result of the domestic market concentration, which results in larger firms being more active in international markets. The benefits of global logistics operations are easier to reap for larger firms, making meat supply chains more vulnerable to domestic and foreign market shocks than other industries. The current supply chain crisis increased the costs of doing business, making it harder for smaller meat trading firms to stay in the market due to lower international profit margins. Southern meat firms must have access to reliable and economical transportation options to ensure their economic success.

Table 1: International Market Concentration in the Southern Meat Trading Market from 2010 to 2020

Note. We used the unique firm identifier provided in PIERS to aggregate trade data for all meat trading firms at the destination/source-year level. The annual export and import shares were then calculated by collapsing the firm-level data at the annual level for each destination or source group and dividing it by the count of all firms or the trade values.