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Oligopsony Fed Cattle Pricing: Did Mandatory Price Reporting Increase Meatpacker Market Power?

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  • Xiaowei Cai
  • Kyle W. Stiegert
  • Stephen R. Koontz

Abstract

We study beef packing margins before and after mandatory price reporting (MPR) was implemented in 2001 using a model that identifies and tests for switching between cooperative and non-cooperative regime pricing. Our results show that after MPR took effect, the duration of non-cooperative regimes was considerably shorter, while cooperative regimes were longer. Oligopsonistic rent, as measured by average economic profit, rose from $0.88/head in the 1990s to $2.59/head after 2001. While MPR is not likely the sole cause for such an increase, there was clearly more market power being exercised in fed cattle markets in the years after the program was implemented than before. Copyright 2011, Oxford University Press.

Suggested Citation

  • Xiaowei Cai & Kyle W. Stiegert & Stephen R. Koontz, 2011. "Oligopsony Fed Cattle Pricing: Did Mandatory Price Reporting Increase Meatpacker Market Power?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(4), pages 606-622.
    • Handle: RePEc:oup:apecpp:v:33:y:2011:i:4:p:606-622
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    Cited by:

    1. Laura Calvet & Rocio de la Torre & Anita Goyal & Mage Marmol & Angel A. Juan, 2020. "Modern Optimization and Simulation Methods in Managerial and Business Economics: A Review," Administrative Sciences, MDPI, vol. 10(3), pages 1-23, July.
    2. Christopher N. Boyer & Charles C. Martinez & Joshua G. Maples & Justin Benavidez, 2023. "Price ranges from fed cattle negotiated cash sales," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(3), pages 1659-1671, September.
    3. Thomas Kopp & Richard J. Sexton, 2021. "Farmers, Traders, and Processors: Buyer Market Power and Double Marginalization in Indonesia," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(2), pages 543-568, March.
    4. Gloria Solano Hermosilla & Pavel Ciaian & Jonas Kathage, 2019. "Market transparency: Costs of external data reporting by private operators in the EU agri-food supply chain - A survey-based analysis," JRC Research Reports JRC116927, Joint Research Centre.
    5. Dimitrios Panagiotou, 2019. "Market Power Effects of the Livestock Mandatory Reporting Act in the U.S. Meat Industry: a Stochastic Frontier Approach Under Uncertainty," Journal of Industry, Competition and Trade, Springer, vol. 19(1), pages 103-122, March.
    6. Scott W. Fausti & Zhiguang Wang & Bashir A. Qasmi & Matthew A. Diersen, 2014. "Risk and marketing behavior: pricing fed cattle on a grid," Agricultural Economics, International Association of Agricultural Economists, vol. 45(5), pages 601-612, September.
    7. Pozo, Veronica F. & Bejan, Vladimir & Tejeda, Hernan, 2016. "Disentangling Supply and Demand Shocks to Identify Changes in the Live Cattle’s Market Structure Post Livestock Mandatory Price Reporting Act," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236234, Agricultural and Applied Economics Association.
    8. Chanjin Chung & Johnna Rushin & Prasanna Surathkal, 2018. "Impact of the livestock mandatory reporting act on the vertical price transmission within the beef supply chain," Agribusiness, John Wiley & Sons, Ltd., vol. 34(3), pages 562-578, June.
    9. Joseph, Kishore & Garcia, Philip & Peterson, Paul E., 2016. "Does the Boxed Beef Price Inform the Live Cattle Futures Price?," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236166, Agricultural and Applied Economics Association.
    10. Fausti, Scott & Diersen, Matthew & Qasmi, Bashir & Adamson, Bill, 2015. "The Influence of Market Power and Market Trends on Grid Market Signals," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(1), pages 1-12.
    11. Rao Fu & Chenguang Li & Liming Wang, 2021. "Market Power in the Irish Beef Processing Industry," Sustainability, MDPI, vol. 13(11), pages 1-18, June.
    12. Fausti, Scott W. & Qasmi, Bashir A. & Diersen, Matthew A & Adamson, Bill, 2014. "Grid Valuation of Beef Carcass Quality: Market Power and Market Trends," Economics Staff Papers 171423, South Dakota State University, Department of Economics.
    13. Kalyn Coatney & Jesse Tack, 2014. "The Impacts of an Antitrust Investigation: A Case Study in Agriculture," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(4), pages 423-441, June.
    14. Yuliya V. Bolotova, 2022. "Competition issues in the U.S. beef industry," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(3), pages 1340-1358, September.

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