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Impacts of Alternative Marketing Agreement Cattle Procurement Volumes on Packer Costs: Evidence from Plant-Level P&L Data

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  • Koontz, Stephen R.
  • Muth, Mary K.
  • Lawrence, John D.

Abstract

It has been argued that access to captive supply cattle improve the economic efficiency of beef packing facilities. However, this argument has not been subject to hypothesis testing. This work models the cost efficiencies associated with captive supplies or cattle we refer to as being sourced through alternative marketing agreements (AMAs). We find that slaughter and processing costs are lower ceteris paribus for AMA cattle than for cash market cattle. We find that plants that slaughter cattle from AMA sources operate at higher monthly volumes ceteris paribus and lower average costs per head. And we find that plants that slaughter cattle from AMA sources have more predictable volumes ceteris paribus and have lower average costs per head. If AMAs were limited or prohibited then packing industry efficiency would be negatively impacted and that fed cattle prices would be negatively impacted.

Suggested Citation

  • Koontz, Stephen R. & Muth, Mary K. & Lawrence, John D., 2007. "Impacts of Alternative Marketing Agreement Cattle Procurement Volumes on Packer Costs: Evidence from Plant-Level P&L Data," 2007 Conference, April 16-17, 2007, Chicago, Illinois 37559, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nccsci:37559
    DOI: 10.22004/ag.econ.37559
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    References listed on IDEAS

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