Since 1977, the U.S. beef packing industry has been restructured at a pace unprecedented in large American industries. By 1987, four packers slaughtered over two-thirds of all steers and heifers. In the thirteen regional feedlot-packer markets studied here, the four leading packers slaughtered 85 percent of fed cattle, on average. The impact of packer concentration on fed cattle prices during 1971–86 was examined using several econometric models. The results generally support the hypothesis that packer concentration was negatively related to live cattle prices. Cattle prices were estimated to be about 3 percent less in the most concentrated region compared to the least concentrated region. There was evidence of a critical concentration of CR
4=60 in regional livestock markets.
Key words Beef packers - competition - concentration-price - market power - market structure
The authors are Professor and Associate Research Scientist, respectively, Department of Agricultural Economics, University of Wisconsin-Madison. The helpful comments of Matthew Holt, Willard F. Mueller, Jean Paul Chavas, and Leonard Weiss on earlier versions of this paper are gratefully acknowledged. Certain unpublished data used in this analysis was provided by the Packers and Stockyards Administration, USDA (P&SA). P&SA's cooperation in providing the information in no way implies either agreement nor disagreement with the methods, conclusions, or implications derived from this analysis.