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Impacts from meatpacking firm mergers in an experimental market

Author

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  • Clement E. Ward

    (Department of Agricultural Economics, 515 Ag. Hall, Oklahoma State University, Stillwater, Oklahoma 74078)

  • Jong-In Lee

    (Department of Agricultural and Resource Economics, Kangwon National University, Chunchon, Kangwon-Do, 200-701, Republic of Korea)

Abstract

The Fed Cattle Market Simulator (FCMS), an experimental market, was used to estimate impacts from two meatpacking firm mergers. Data were collected from two FCMS workshops with large agribusiness firms. Experimental mergers involved the two smaller packers in the market in one case and the two larger packers in another. During the merger period, market prices were significantly higher than prior to the merger in both cases. Following the dissolution, results were mixed. Management of the merged firms appeared to significantly affect how effectively merged packers operated, thus affecting both behavior and performance. For both mergers, profits of the merged firm were higher relative to profits of rival firms. Merged firms appeared to have achieved some synergies in procurement or economies of scope (i.e., multi-plant economies). An increased Herfindahl index was associated with lower fed cattle prices in one case and higher prices in the other. [EconLit citations: L130, L290, L660]. © 2002 John Wiley & Sons, Inc.

Suggested Citation

  • Clement E. Ward & Jong-In Lee, 2002. "Impacts from meatpacking firm mergers in an experimental market," Agribusiness, John Wiley & Sons, Ltd., vol. 18(2), pages 247-260.
    • Handle: RePEc:wly:agribz:v:18:y:2002:i:2:p:247-260
    DOI: 10.1002/agr.10015
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    References listed on IDEAS

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    1. Tremblay, Victor J & Tremblay, Carol Horton, 1988. "The Determinants of Horizontal Acquisitions: Evidence from the U.S. Brewing Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 37(1), pages 21-45, September.
    2. Clement E. Ward, 1993. "Comparative analysis of cattle slaughtering and fabricating costs," Agribusiness, John Wiley & Sons, Ltd., vol. 9(5), pages 441-451.
    3. Duewer, Lawrence A. & Nelson, Kenneth E., 1991. "Beefpacking and Processing Plants: Computer-Assisted Cost Analysis," Staff Reports 278515, United States Department of Agriculture, Economic Research Service.
    4. Clement E. Ward & Stephen R. Koontz & Derrell S. Peel & James N. Trapp, 1996. "Price Discovery in an Experimental Market for Fed Cattle," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 18(3), pages 449-466.
    5. Anderson, John D. & Ward, Clement E. & Koontz, Stephen R. & Peel, Derrell S. & Trapp, James N., 1998. "Experimental Simulation Of Public Information Impacts On Price Discovery And Marketing Efficiency In The Fed Cattle Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(1), pages 1-17, July.
    6. Frank R. Lichtenberg & Donald Siegel, 1987. "Productivity and Changes in Ownership of Manufactoring Plants," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3, Specia), pages 643-684.
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    Cited by:

    1. Heyder, Matthias & Ebneth, Oliver & Theuvsen, Ludwig, 2008. "Financial Market Reactions To International Mergers & Acquisitions In The Brewing Industry: An Event Study Analysis," 47th Annual Conference, Weihenstephan, Germany, September 26-28, 2007 7610, German Association of Agricultural Economists (GEWISOLA).
    2. Heyder, M. & Ebneth, O. & Theuvsen, L., 2008. "Financial Market Reactions to International Mergers & Acquisitions in the Brewing Industry: An Event Study Analysis," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 43, March.
    3. Oliver Ebneth & Ludwig Theuvsen, 2007. "Large mergers and acquisitions of European brewing groups-event study evidence on value creation," Agribusiness, John Wiley & Sons, Ltd., vol. 23(3), pages 377-406.
    4. Ward, Clement E. & Koontz, Stephen R. & Peel, Derrell S. & Trapp, James N., 2001. "Lessons Learned From Research With The Fed Cattle Market Simulator," 2001 Annual Meeting, July 8-11, 2001, Logan, Utah 36181, Western Agricultural Economics Association.

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