Testing for Processor Market Power in the Markets for Cattle and Hogs in Canada |
| |
| Authors: | Kwamena Quagrainie James Unterschultz Michele Veeman Scott Jeffrey |
| |
| Institution: | Aquaculture/Fisheries Center, University of Arkansas at Pine Bluff, 1200 N. University Drive, P.O. Box 4912, Pine Bluff, Arkansas 71601 (phone: 870-543-8163;e-mail: ).;Associate professor, Department of Rural Economy, University of Alberta, Edmonton, Alberta.;Professor, Department of Rural Economy, University of Alberta, Edmonton, Alberta.;Associate professor, Department of Rural Economy, University of Alberta, Edmonton, Alberta. |
| |
| Abstract: | Deviations of livestock input prices from processor marginal value product are usually interpreted as an indication of the application of market power by the meat packing industry. However, market power depends on economic conditions that can influence the behavior of meat packers in the market for cattle and hogs. An industry-level translog profit function is applied to data on the Canadian finished cattle and hog markets and industry-wide oligopsony market power functions are estimated. The estimates suggest beef packers exercised a small but sustained amount of market power in the Canadian finished cattle market from 1978 to 1997. This is not the case in the market for hogs, which was competitive from 1960 to 1997. Application of market power in packers'purchases of farm animals decreased with increases in the utilization of domestic supply of slaughter animals and with increased levels of livestock exports. Livestock productivity increases appear to have significantly enhanced oligopsony power in packers'purchases of farm animals. The analysis suggests that beef processors may exert market power when cattle prices are relatively higher. |
| |
| Keywords: | |
|
|
