Market and Cost Structure in the U.S. Beef Packing Industry: A Plant-Level Analysis

A resurgence of consolidation in the U.S. meat packing industry in the past few decades has stimulated academic and policy debate. Issues raised include the role of cost economies in driving these patterns, and the effects on the agricultural sector (cattle producers) from market power. Here, plant level cost and revenue data for U.S. beef packing plants are used to estimate a cost-based model incorporating cattle- and output-market pricing behavior. The robust results indicate little market power exploitation in either the cattle input or beef output markets, and that any apparent evidence is counteracted by cost efficiencies such as utilization and scope economies.     

Testing for Processor Market Power in the Markets for Cattle and Hogs in Canada

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.     

Estimated Value of Increased Pricing Accuracy for Fed Cattle

To improve vertical market coordination beef packers have introduced fed cattle grid pricing systems that offer premiums or discounts for varying carcass quality and yield grades. This study calculates the value of cattle quality information for producers considering live, dressed, and grid pricing alternatives. The value of fed cattle quality and yield grade information is at least $15/head. When fed cattle are sold on a live weight basis, high-quality cattle subsidize low-quality cattle by an average of $30/head. Price signals that could improve beef market coordination are ignored when fed cattle are marketed using traditional live or dressed weight methods.     

Analysis of a supply-control program under uncertainty and imperfect competition: Chinese cabbage in Taiwan

Researchers have often attributed the farm–wholesale price spread, after adjusting for marketing costs, as compensation for marketing firms' risk bearing. However, price spreads in excess of marketing costs can also be due to marketing firms' exercise of market power. In settings where both imperfect competition and marketer risk aversion are plausible, a modeling framework must be sufficiently general to accommodate both types of behavior. This article develops and estimates such a model in the context of fresh produce marketing and develops the implications for analysis of supply‐control programs. The model is applied to the production and marketing of Chinese cabbage in Taiwan and specifically to the analysis of supply‐control programs implemented in this industry by the Taiwanese government. The empirical results provide little support for the hypothesis that marketing firms exhibit risk averse behavior, but they do show that marketing firms exercise oligopsony power in procurement of the product from farmers, and that this power is positively related to the quantity supplied in each market period. This provides a heretofore unexplored impetus for supply controls intended to raise producer incomes. However, such controls are also rendered less effective by imperfect competition because marketing firms capture part of the benefits from supply reduction.     

Effects of Bovine Spongiform Encephalopathy Outbreaks on U.S. Cattle and Beef Prices

U.S. trade of beef and live cattle declined substantially after the discoveries of bovine spongiform encephalopathy (BSE) in Canada and the United States in 2003. In this study, an econometric model is developed to estimate the effects of lifting trade restrictions on U.S. cattle and beef prices. Results show that increases in imports of Canadian cattle and beef would lower prices of slaughter steers, feeder steers, and retail beef, but these negative impacts would be more than negated by the positive effects on prices that would result if beef exports return to near pre-BSE levels.     

Short-Run Supply Responses in the U.S. Beef-Cattle Industry

This article investigates the response of beef-cattle producers to changes in the price of cattle. Previous research has suggested that there may be a negative short-run supply response to a permanent increase in the price of cattle. We build a dynamic, rational expectations model that separates the markets for fed and unfed beef. This separation generates predictions that the supply response is generally positive, even for permanent shocks in the short run, and nests the negative supply response as a special case for appropriately restricted demand shocks.     

Canadian Cattle Cycles and Market Shocks

We analyze Canadian beef cattle cycles using time‐series properties of four variables: total cattle inventories, beef cow inventories, beef supply, and beef prices. Our aim is to provide up‐to‐date estimates of the duration of the cycles, and to determine whether or not some of the recent market shocks can be associated with changes in the nature of the cycles. Spectral decomposition of the variables reveals 10‐year cycles in total cattle inventories, beef cow inventories, beef supply, and beef prices. Seasonal and annual cycles are also found in beef supply and prices, respectively. Using intervention analysis, exchange rate appreciation, feed price escalation, and bovine spongiform encephalopathy (BSE) are modeled as pure jumps. Exchange rate and feed price shocks are modeled as having started in 2002 and 2007, respectively, and persisted up to the end of the sample period, while BSE is modeled as a shift for the period 2003 to 2005. We find significant impacts of the three shocks on total inventories, but beef supply appears to have been impacted by exchange rates and BSE. A spectral comparison of the pre‐ and post‐shock periodograms of beef supply reveals a 58% reduction in the peak amplitude of the beef supply cycle.     

Risk and (Re-)organization in Agriculture: The Economics of Back grounding Cattle in Saskatchewan

The beef system in western Canada is currently undergoing restructuring. To increase the number of animals a feedlot finishes, their portion of the production process is being narrowed to the final 136 kgof weight gain. This results in a stage of production known as backgrounding, where calves are grown before entering the feedlot. This paper explains the reorganization that is occurring in the context of transaction cost economics, which explains this evolution as a process in which the governance structure involved in contracting has minimized the transaction costs. New methods of marketing these backgrounded cattle are being developed, which may increase the profitability of these operations. This paper measures the impacts of five different marketing options on the backgrounding enterprise's risk and returns. Thirteen enterprises are modeled, using various levels of capital and labor intensities, live stock numbers, sizes of calves fed and average daily gains. These models are simulated from 1978 to 1994 using costs of production and prices of cattle. Profits per head calculations allow the comparison of the enterprise efficiencies. The marketing alternatives are then evaluated using mean-variance rule(E-V) and stochastic dominance methods of risk analysis.     

DETERMINANTS OF CHANGE IN THE NORTH AMERICAN FEEDER-CATTLE ECONOMY

Changing flow patterns characterize the North American cattle industry, which are having a significant impact on all aspects of Canadian agriculture. A brief review of important changes taking place in the feeder cattle industry is given together with an analysis of forces influencing the changing interregional economic relationships.
The results suggest an increasing rate of adjustment may be needed in the future as the economic variables and technological advances responsible for much of the change in the past continue to influence the Canadian cattle industry. The impact of change will not occur evenly across all areas and segments of the industry with the interregional trends that have developed particularly the expansion in flows from Western Canada to the Western United States showing no sign of slowing down. Eastern Canada may be under increasing pressure to expand either its imports of feeder cattle and dressed beef or develop its own feeder supply.     

COVID-19 and the Canadian cattle/beef sector: Some preliminary analysis

Canada's cattle/beef sector has already weathered a shock after a 2003 case of BSE resulted in closed borders and industry restructuring. Now, the sector has to adjust to similar shocks due to COVID-19. This paper examines the supply chain from the consumer up to the cow–calf producer by considering consumer reactions, labor market constraints, and supply response. A quarterly market model of North American cattle and beef markets is used to examine price and revenue impacts associated with the market disruptions. Depending on the scenario, there is considerable price and revenue suppression at all levels of the market.     

An Econometric Analysis of Total (Domestic) and Import Demand for Beef in Hong Kong

This paper presents an applied econometric analysis of total (domestic and import) demand for beef in Hong Kong for the period 1970 to 1988. The estimates are in logarithmic form and provide elasticity estimates for beef demand (domestic and import) in Hong Kong. Variables in the estimated domestic demand models (per capita and aggregate) include own price, prices of a substitute (pork) and a complement (rice) and income. Variables in the estimated import demand model include demand side variables (price of beef, price of pork, price of rice and income) and the price of imported live cattle as a supply shifting variable. The elasticities were inelastic for the domestic demand models while most of those for the import demand model were elastic.     

Dynamic adjustment in the US beef market with imports

This paper hypothesizes that while there are important qualitative differences in domestic beef and imported beef, beef and cattle imports also represent attempts by the US beef processing and wholesale sector to adjust to short-run changes in supply and demand. Dynamic production theory is applied to the problem to test for this adjustment process, and presents a production theory approach to meat trade that has previously been included in demand functions. The results of this analysis suggest that the method used provides a reasonable and appropriate representation of the import behavior of the US processing and wholesale beef sector.     

Inflation,capital markets and the supply of beef

This paper puts forward an explanation for the negative elasticity of supply of beef found in many LDC's. As is explained by Jarvis (1974), the elasticity of supply of beef may be negative in the short run due to the dual role of cattle as both a capital and a consumption good. But in some LDC's, and especially in Latin America, one may find a long-run negative association between slaughter and prices, that cannot be explained by assuming shocks to slaughter are causing changes in prices. It is no coincidence that Jarvis' hypothesis itself was developed to explain developments in Argentina, a country with chronic high inflation. The paper argues that this long-run relationship cannot be explained by the Jarvis hypothesis, and offers an alternative hypothesis based on the demand for cattle as a hedge against inflation. The long-run negative association between slaughter and prices has been found in high inflation countries. High inflation combined with excessive regulation of capital markets cause the well known phenomenon of desintermediation. It is argued here that cattle plays a role in the inflation hedged portfolio that is then demanded. Therefore, with imperfect capital markets the supply of beef is affected by the demand for cattle as an asset, and this demand, in turn, is affected by inflation. This paper will only attempt to prove the link between imperfect capital markets and the supply of beef. The way inflation in a repressed capital market leads to an imperfect capital market is not addressed here, for reasons of brevity. The paper will develop a model that in the context of imperfect capital markets results in a negative elasticity of supply. The model will then be tested with Uruguayan data. Uruguayan data are very adequate to test the hypothesis because they cover both a period without inflation and a period of high inflation. The results support that cattle was used as an alternative to money holdings when inflation signified a big tax on the latter. Inflation therefore affected the demand for cattle, or, conversely, the supply of beef.     

Utilizing Ultrasound Technology to Improve Livestock Marketing Decisions

This study estimates the value of using ultrasound technology to improve cattle marketing decisions by optimally choosing a particular marketing method. For the particular group of cattle analyzed, results indicate that using ultrasound information to selectively market cattle could have increased revenue by $25.53/head, $4.98/head, or $32.90/head, compared with simply marketing all animals on a live weight, dressed weight, or grid basis, respectively. Even if producers incorporate such information as placement weight, days on feed, and breed into their expectations about final carcass characteristics, our results indicate that ultrasound measures could improve average revenue by $4.16/head.     

A SUPPLY FUNCTION FOR DAIRY PRODUCTS

Results of an investigation into factors affecting the aggregate supply of dairy products in Australia are presented. Empirical estimates of the parameters of the supply function, using ordinary least squares, indicate that some concept of average prices for dairy products is a more important determinant of supply than ratios of prices of dairy products relative to prices of production substitutes such as beef cattle or sheep and lambs. The empirical results also indicate that the quota-type effects of the various metropolitan fluid milk schemes are important in determining supply. Effects of new technology on supply could not be quantified due to intercorrelation of explanatory variables.     

Evolving Producer–Packer–Customer Linkages in the Beef and Pork Industries

The U.S. pork and beef sectors are rapidly moving from traditional cash markets to formal vertical linkages. In 1999, 27% of hogs and 65% of cattle were traded in the cash market and packers owned 18% of hogs and 5% of cattle; the rest were procured via marketing contracts. Contrary to popular opinion that plant efficiency is the impetus for the change, packers clearly identified quality concerns as the dominant reason for using marketing contracts or self-production. Quality standards and procurement systems to achieve them will increase in importance with the introduction of more branded pork and beef products.     

中国肉牛养殖生产布局的阶段特征、变迁路径和影响机制——基于2008—2019年省域统计数据的空间计量分析

[目的]为充分了解“十一五”“十二五”“十三五”期间中国肉牛养殖及育肥养殖生产布局的阶段特征、变迁路径和影响机制。[方法]文章运用2008—2019年中国各地肉牛年末存栏量和牛肉产量数据,利用生产集中度、生产重心迁移轨迹阐述生产布局的阶段特征和变迁路径,利用莫兰指数、吉尔里指数和G指数分析空间相关性,利用空间面板模型分析影响因素及效应。[结果]肉牛养殖生产重心向西北方迁移了154.6km,自2017年空间正相关逐渐显著,粗饲料资源禀赋、劳动力质量、技术进步和非农就业机会是布局变迁的重要影响因素;肉牛育肥养殖生产重心向西迁移了119.15km,三大指数均具有显著性,饲料资源禀赋、劳动力质量、技术进步、市场价格、交通通达度、畜牧产业比较优势和非农就业机会是布局变迁的重要影响因素。[结论]肉牛养殖和育肥养殖均呈现出由农区向牧区迁移趋势,且存在空间正相关性,但具体变迁路径和影响机制有所差异,就此提出“合理编制肉牛生产规划、系统加强流通环节建设、强化科学技术支撑、保障饲料稳定供应”的政策建议。     

Comparative Advantage Indices of Selected Livestock Production Sectors in Brunei Darussalam

Abstract

This study calculates the protection rates and comparative advantage indices of livestock industry in Brunei from an import substitution perspective. Four livestock sub-sectors were being evaluated: broiler, layer, goat and beef cattle. Two measures of government intervention indices were calculated, namely nominal protection rate (NPR) and effective protection rate (EPR). Domestic resource cost (DRC) and resource cost ratio (RCR) indices were computed to determine the comparative advantages of the livestock industry. In general, the results indicate that the livestock industry in Brunei was heavily protected. The study revealed the existence of comparative advantage only for very large farms producing poultry meat and eggs. Similarly in the ruminant sector, goat production appears to have comparative advantage over beef cattle. Small and medium poultry farms and large non-ruminant farms and cattle beef production possess comparative disadvantage despite being highly protected industries.     

Management of a Cooperative Bargaining Association: A Case in the Pacific Northwest Asparagus Industry

Bargaining cooperatives are formed and operated with the primary goal of providing countervailing market power for many small producers faced with selling their product to a few large buyers. This case study outlines the management challenges encountered in organizing and managing a bargaining association to represent Washington and Oregon asparagus growers in contract negotiations with asparagus buyers. Industry events and changing marketing conditions leading to a management crisis that threatened survival of the cooperative are outlined. The case introduces relationships between fresh and processed market segments in the produce industry that must be carefully incorporated into a successful management strategy for a bargaining cooperative.     

Improving Market Selection for Fed Beef Cattle: The Value of Real-Time Ultrasound and Relations Data

The introduction of value-based marketing has provided the industry with the means to price cattle based on their desired attributes and has provided an alternative marketing channel for producers to select. Gains can be made by selecting animals that will be "in the grid" for value-based marketing channels while screening out animals that won't and sending them to dressed-value or live-weight marketing channels. This study estimates the gains from using real-time ultrasound (RTU) as well as information on graded animal relations (i.e., animals that have the same parentage slaughtered and graded in previous years) to predict carcass quality and yield grades prior to slaughter. These predictions are used in an optimization model designed to select the marketing channel for individual animals that will maximize returns. The optimal marketing strategy from this study involves a mix of live-weight, dressed-weight and grid sales methods rather than marketing all of the animals together. The results suggest that increases in returns in the range of $0.61–27.26 per head from using relations data, $9.04-16.75 per head from using RTU measures and $11.27-27.93 per head from using both to selectively market beef animals. These estimates do not account for the gains that could be obtained from using RTU to improve market timing, i.e., to time when the animal will grade best.