Manufacturing

Food and beverage manufacturing

Food and beverage manufacturing plants transform raw agricultural materials into products for intermediate or final consumption by applying labor, machinery, energy, and scientific knowledge. Some products may serve as inputs for further processing (such as syrup for manufacturing soda). In 2016, these plants accounted for 16 percent of the value of shipments from all U.S. manufacturing plants. Because intermediate inputs (primarily agricultural materials) account for a relatively large share of food and beverage manufacturers' costs, value added in food and beverage manufacturing represents a slightly smaller share (14.7 percent) of value added in all manufacturing.

Meat processing includes livestock and poultry slaughter, processing, and rendering, and is the largest single component of food and beverage manufacturing, with 24 percent of shipments in 2016. Other important components include dairy (13 percent), beverages (13 percent), grains and oilseeds (10 percent), fruits and vegetables (8 percent), and bakery and tortilla products (8 percent). Meat processing  (18 percent) and beverage manufacturing (17 percent) are also the largest components of the food sector's total value added.

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There are many food and beverage processing establishments (plants) in the U.S.—over 30,000 owned by about 25,800 companies in 2012, according to the most recent comprehensive data in the Census Bureau's 2012 Economic Census.

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These plants employed more than 1.5 million workers in 2016 (about 14 percent of all U.S. manufacturing employment and just over 1 percent of all U.S. nonfarm employment). The meat processing industry employed the largest percentage of food and beverage manufacturing workers in 2016 (31 percent), followed by bakeries (16 percent), and fruits and vegetables (10 percent).

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Food and beverage processing plants are located throughout the United States. According to the Census Bureau's County Business Patterns (CBP), California had the most food and beverage manufacturing plants (5,639) in 2016, while New York (2,578) and Texas (2,252) were also leading food and beverage manufacturing States. The number of processing plants for various industry segments are also reported in County Business Patterns.

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Food processing plants

Consolidation is occurring in many food processing industries, where plant sizes have increased sharply and mergers have led to fewer but larger companies. In many cases, changing processing plant technologies and the emergence of new scale economies has facilitated consolidation. Methods of vertical coordination are also changing, with a shift away from the use of spot markets toward greater reliance on contracting in some grains and in livestock (see reports in the Agricultural Contracting Update series).

Concentration in several processing industries raises questions about market power in the sale of agricultural products and about the effects of concentration on innovation and productive efficiency. High and increasing levels of concentration in some sectors of the food industry, coupled with changing methods of vertical coordination between producers and processors, have led to concerns about reduced competition. Policy concerns include thinly-traded spot markets where processors could use informational advantages to lower prices paid to producers and increased difficulties in gathering market information and assessing market performance. At the same time, contracts and vertical integration offer more opportunities for coordination that may foster gains in efficiency that would ultimately benefit producers, processors, and consumers. For a discussion of the effects of increased concentration and coordination on producer prices and returns and policy options to address thin markets, see:

Thinning Markets in U.S. Agriculture