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Monopsonistic Food Processing and Farm Prices: The Case of the West Alabama Catfish Industry

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  • Kinnucan, Henry
  • Sullivan, Gregory

Abstract

Increasing concentration in food processing has important economic implications for agricultural producers and consumers. This paper addresses the issue by focusing on a case where pure monopsony conditions appear to hold–catfish processing in West Alabama. Farm-level impacts of the market power imbalance are described via a six equation theoretical model. Results show price elasticity of farm supply governing the economic incentive to the processor for exploiting its market power: less (more) elastic supply implies greater (lesser) divergence between competitive and monopsony price. The theoretical model is operationalized using an indirect procedure recently suggested by Houck for estimating farm level supply elasticities. Based on these supply elasticities and historical prices, the model predicts a 12-35 percent potential reduction in prices received by West Alabama producers as a result of market power imbalance.

Suggested Citation

  • Kinnucan, Henry & Sullivan, Gregory, 1986. "Monopsonistic Food Processing and Farm Prices: The Case of the West Alabama Catfish Industry," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 18(2), pages 15-24, December.
    • Handle: RePEc:cup:jagaec:v:18:y:1986:i:02:p:15-24_00
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    References listed on IDEAS

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    1. Lacewell, Ronald D. & Nichols, John P. & Jambers, T. Harold, 1973. "An Analysis of Pond Raised Catfish Production in Texas," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 5(1), pages 141-145, July.
    2. Tweeten, Luther G & Quance, C Leroy, 1969. "Positivistic Measures of Aggregate Supply Elasticities: Some New Approaches," American Economic Review, American Economic Association, vol. 59(2), pages 175-183, May.
    3. Russell, Jesse R., 1972. "Catfish Processing: A Rising Southern Industry," Agricultural Economic Reports 305673, United States Department of Agriculture, Economic Research Service.
    4. Willard F. Mueller, 1983. "Market Power and Its Control in the Food System," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(5), pages 855-863.
    5. Luther G. Tweeten & C. Leroy Quance, 1969. "Positivistic Measures of Aggregate Supply Elasticities: Some New Approaches," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 51(2), pages 342-352.
    6. Lacewell, Ronald D. & Nichols, John P. & Jambers, T. Harold, Jr., 1973. "An Analysis Of Pond Raised Catfish Production In Texas," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 5(1), pages 1-5, July.
    7. Hanson, Gregory D. & Martin, Neil R. & Flynn, John B., 1984. "Production, Price and Risk Factors in Channel Catfish Farming," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 16(1), pages 173-182, July.
    8. Hanson, Gregory D. & Martin, Neil R., Jr. & Flynn, John B., 1984. "Production, Price And Risk Factors In Channel Catfish Farming," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 16(1), pages 1-10, July.
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    Cited by:

    1. Kim, C.S. & Schaible, Glenn D., 1987. "Monopsonistic Food Processing And Farm Prices: Comment," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 19(2), pages 1-2, December.
    2. Buccola, Steven T., 1989. "Pricing Efficiency In Agricultural Markets: Issues, Methods, And Results," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(1), pages 1-11, July.
    3. Kinnucan, Henry W. & Sindelar, Scott & Wineholt, David & Hatch, L. Upton, 1988. "Processor Demand And Price-Markup Functions For Catfish: A Disaggregated Analysis With Implications For The Off-Flavor Problem," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 20(2), pages 1-12, December.
    4. David Bouras & Troy Frank & Eric Burgess, 2017. "Functional Forms and Oligopolistic Models: An Empirical Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 645-649.
    5. Kinnucan, Henry W., 1995. "Price Bargaining Without Supply Control," Agricultural and Resource Economics Review, Cambridge University Press, vol. 24(1), pages 119-127, April.
    6. Kinnucan, Henry W. & Cacho, Oscar J. & Hanson, Gregory D., 1986. "Effects Of Selected Tax Policies On Management And Growth Of A Catfish Enterprise," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 18(2), pages 1-11, December.
    7. Chen, Xuan & Scuderi, Ben, 2016. "Assessing the Market Integration of Domestic and Imported Catfish in the U.S," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235550, Agricultural and Applied Economics Association.
    8. Lumnije Thaçi, 2022. "Bank Loans Types and Economic Growth - Literature Review," European Journal of Economics and Business Studies Articles, Revistia Research and Publishing, vol. 8, ejes_v8_i.

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