Explaining Plant Exit in the U.S. Meat and Poultry Industries

Recent U.S. pathogen reduction and HACCP food safety regulations, which increased the costs of producing meat and poultry products, may have affected the rate of plant exit during the 1996 to early 2000 time period over which the regulations were implemented. We estimate and compare probit models for U.S. federally inspected meat slaughter (920 plants), poultry slaughter (280 plants), and meat and poultry processing-only (4,300 plants) plants to determine which factors most contributed to the probability of plant exit. The factors we consider include plant-level, company-level, and regional-level characteristics and regional supply conditions. Although plant size affected the probability of exit for slaughter plants, it did not affect exit for processing-only plants. Other variables, such as measures of market structure and competition, have different effects for each of the industries.