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U.S. Beef Industry: Cattle Cycles, Price Spreads, and Packer Concentration

Author

Listed:
  • Mathews, Kenneth H., Jr.
  • Hahn, William F.
  • Nelson, Kenneth E.
  • Duewer, Lawrence A.
  • Gustafson, Ronald A.

Abstract

In early 1996, the peak in the current cycle of cattle inventories coincided with a long list of negative factors--negative returns at the farm and feedlot, record-high feed grain prices, a severe drought in 1995-96, widening farm-retail price spreads, a low farmers' share of the consumers' Choice beef dollar, and reports of high profits for beefpackers. This confluence created an atmosphere in which some producers and members of Congress questioned whether the cattle industry was adversely affected by high packer concentration and market power. In this report, we examine the cattle cycle of the 1990's to determine if there are differences from previous cattle cycles and, if so, how and why they are different. We found that values for many variables at the 1996 cyclical peak in cattle inventories, while bad, were not the worst on record. Further, price levels during the cattle cycle of the 1990's were better, our models suggest, than they could have been, given earlier patterns of price adjustment. Finally, despite the growth of packer concentration, we failed to demonstrate large negative effects of packer concentration on cattle prices during the 1991-to-present cattle cycle.

Suggested Citation

  • Mathews, Kenneth H., Jr. & Hahn, William F. & Nelson, Kenneth E. & Duewer, Lawrence A. & Gustafson, Ronald A., 1999. "U.S. Beef Industry: Cattle Cycles, Price Spreads, and Packer Concentration," Technical Bulletins 33583, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerstb:33583
    DOI: 10.22004/ag.econ.33583
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    Cited by:

    1. Bolotova, Yuliya V., 2021. "An Empirical Analysis of Pricing in the U.S. Beef Industry," 2021 Annual Meeting (Virtual), February 6-9, 2021 319359, Southern Agricultural Economics Association.
    2. Andrew D. Bugg, 2005. "The Livestock Mandatory Reporting Act: Has Information Pooling Led to Anticompetitive Behaviour in the US Beef Industry?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2005-06, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    3. Schroeder, Ted C & Tonsor, Glynn T & Schulz, Lee L & Johnson, Bradley J & Sommers, Christopher, 2021. "USDA ERS Meat Price Spread Data Product Review," Contractor and Cooperator Reports 327349, United States Department of Agriculture, Economic Research Service.
    4. Dell Champlin & Eric Hake, 2006. "Immigration as industrial strategy in American meatpacking," Review of Political Economy, Taylor & Francis Journals, vol. 18(1), pages 49-70.
    5. Arunas Juska & Lourdes Gouveia & Jackie Gabriel & Kathleen Stanley, 2003. "Manufacturing bacteriological contamination outbreaks in industrialized meat production systems: The case of E. coli O157:H7," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 20(1), pages 3-19, March.
    6. Aadland, David, 2004. "Cattle cycles, heterogeneous expectations and the age distribution of capital," Journal of Economic Dynamics and Control, Elsevier, vol. 28(10), pages 1977-2002, September.
    7. Jayson L. Lusk & Glynn T. Tonsor & Lee L. Schulz, 2021. "Beef and Pork Marketing Margins and Price Spreads during COVID‐19," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(1), pages 4-23, March.
    8. David Aadland, "undated". "The economics of cattle supply," Working Papers 2000-11, Utah State University, Department of Economics.
    9. Leroux, Nicole & Wortman, Max S., Jr. & Mathias, Eric D., 2001. "Dominant Factors Impacting The Development Of Business-To-Business (B2b) E-Commerce In Agriculture," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 4(2), pages 1-14.
    10. Griffith, G.R. & Alford, A.R., 2002. "The US Cattle Cycle and its Influence on the Australian Beef Industry," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 10, pages 1-15, June.
    11. Colette, W. Arden & Almas, Lal K. & Hittle, Chad A., 2003. "Utilizing Expected Revenue In Selecting Optimal Marketing Alternatives For Fixed Resource Cow/Calf Operators In The Texas Panhandle," 2003 Annual Meeting, February 1-5, 2003, Mobile, Alabama 35187, Southern Agricultural Economics Association.
    12. Sayed H. Saghaian, 2007. "Beef safety shocks and dynamics of vertical price adjustment: The case of BSE discovery in the U.S. beef sector," Agribusiness, John Wiley & Sons, Ltd., vol. 23(3), pages 333-348.
    13. Sheng-Yeh, Wu & Guan-Ru, Chen, 2020. "Price Stickiness under Stochastic Demand," Bulletin of Applied Economics, Risk Market Journals, vol. 7(2), pages 109-117.
    14. Hunnicutt Lynn & Aadland David, 2003. "Inventory Constraints in a Dynamic Model of Imperfect Competition: An Application to Beef Packing," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 1(1), pages 1-24, March.
    15. Griffith, Garry & Alford, Andrew R., 2000. "Outlook for the Australian beef industry," 2000 Conference (44th), January 23-25, 2000, Sydney, Australia 171910, Australian Agricultural and Resource Economics Society.

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    Keywords

    Livestock Production/Industries;

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