This report describes and analyzes the current vertical integration, producer-processor or first handler contract and
cash market linkages in agriculture, emphasizing the beef, pork, and poultry producer and processor vertical market structures, and how they compare to the vertical linkages in other important agricultural commodity systems; Driving forces for the changes observed in the food and agriculture market structure, and the economic incentives for tighter vertical coordination linkages in the beef, pork, and poultry industries; Benefits and costs of these coordination system changes in agriculture, emphasizing those in the beef, pork, and poultry industries for processors and merchandisers, independent and contract producers, other industry participants, and consumers; and Implications of packer vertical integration or contract linkages with cattle and hog producers for independent and contract livestock producers, packers, other industry participants, consumers, global market competitiveness, price discovery and reporting, policy makers, and regulators. The results indicate that the consumers of beef and pork are willing to pay an additional 20 to 30 cents per pound for meat from a system of production that results in a branded, customized
product. The results also suggest that this premium will grow over the next five years. Evident, too, from the results is the value consumers place on food safety and the ability to trace product to the point of origin. A potential market for attractively packaged products is also suggested here. The results also indicate that a group of consumers is willing to pay more for products from hormone-free and other animal- friendly environments. This added value to beef and pork products cannot be captured without innovative vertical linkages throughout the beef and pork production, processing, and merchandising system. That perceived value, as it increases in the future, serves as an increasingly important driving force in the industry reorganization which is now underway and very likely to continue.