The U.S meat and poultry industry contributes $832 billion annually to the national economy or 5.8% of gross domestic product. It also impacts all sectors of the national economy and is the lifeblood of numerous small communities throughout the country. How ironic then that declining cattle, hog and chicken numbers threaten to shrink the industry and diminish this contribution.

The industry makes its contribution in three areas. Production through retail is the first. The second relates to companies that supply the industry. The third is the induced impact on the economy, which includes job creation and increased spending in communities.

From large cities to small towns, the meat industry is an important part of the nation's economy, says the American Meat Institute, which commissioned an economic impact study (see it at meatfuelsamerica.com). The industry creates 6.193 million jobs while annual wages total $200 billion. Companies in the three areas annually pay $47 billion in federal taxes and $34 billion in state taxes. The consumption of meat and poultry generates another $2.4 billion in state sales taxes.

The study measures the combined impact of the meat processing, poultry processing, hide and skin production and offal production sectors. The meat and poultry industry includes production, meat distributing and retailing. The 8,370 firms that convert livestock to useful products or directly import meat into the U.S. employ more than 544,500 people in production or importing operations, sales, packaging and direct distribution.

Products then enter a second tier, the wholesaling sector. Its nearly 4,100 firms employ 63,000 people. The third tier of the industry sells product directly to consumers. It has 1.228 million employees whose jobs depend on the sale of meat and poultry products to the public. The entire production through retail area has an annual output of $229 billion and generates 1.817 million jobs, paying $45.5 billion in wages.

The study breaks down the production through retail area into six sectors. The slaughter sector has $55 billion in output, pays $5.74 billion in wages and has 153,000 jobs. The meat sector has $50 billion in output, pays $5.21 billion in wages and has 118,000 jobs. The hides, skin and offal sector has $900 million in output, pays $94 million in wages and has 1,827 jobs.

The study also breaks down the industry's contribution to the economy on a state-by-state basis and by congressional district. The top 10 states in terms of economic contribution are Texas, $83.9 billion; California, $75.8 billion; Illinois, $47.9 billion; Georgia, $43.3 billion; Pennsylvania, $39.1 billion; Arkansas, $38.4 billion; Iowa, $37.6 billion; Ohio, $30 billion; Missouri, $28.4 billion; and New York, $27.4 billion.

The industry, however, faces challenging economic conditions because of the impact of recession on meat demand and fewer animals.

  • Poultry processors have closed several plants in the past year and red meat processors might have to do the same.

  • Pork processing capacity is about 445,000 head/day. But kills this year have been less than 420,000 head and the pig herd is shrinking.

  • The U.S. cattle herd declined by 1.544 million head in 2008 and might fall a similar amount this year, analysts say. This is equivalent to the annual kill of two large beef plants or nearly 12,000 head of daily capacity, based on a five-day week. It's also equivalent to 1.5 million head of cattle-feeding capacity.

  • The packing sector currently has a better balance than feedlots between capacity, supplies and utilization. But that's because it has sharply reduced Saturday kills. The feedlot sector has operated at only 60-65% capacity so far this year. While many feedlots have remained full, others are nearly empty. Dozens of lots are said to be for sale but not attracting buyers. Closure of packing plants or feedlots will be a blow to the rural communities they are in.

Steve Kay is editor and publisher of Cattle Buyers Weekly (www.cattlebuyersweekly.com).