PERFORMANCE EVALUATION OF THE U.S. HOG SLAUGHTER INDUSTRY

Conventional wisdom holds that a small and decreasing number of hog slaughter firms are using their "market power" to take advantage of U.S. hog producers. Existing studies have simply calculated industry concentration ratios and assumed/asserted that the performance of such a concentrated industry must be different from the performance of a perfectly competitive industry. These researchers have rejected without testing the hypothesis that: the observed performance of the U.S. hog slaughter industry is not different from the performance that would be generated by a perfectly competitive industry. This paper derives the theoretical relationships between hog and pork prices, and hence the farm-wholesale price spread, that would exist in a perfectly competitive slaughter hog market. These performance norms are then confronted with observed weekly price/quantity relationships over the 1991-2001 period to compare observed market performance with the ideal performance norms derived from the economic theory of a perfectly competitive market. Based on the market performance measures derived from economic theory of a perfectly competitive market, the hypothesis that the U.S. hog slaughter hog market is a perfectly competitive market cannot be rejected. There simply is not any evidence to support allegations of abuse of market power by meat packers.


Issue Date:
2003
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/26044
Total Pages:
22
Series Statement:
Agricultural Economics Working Paper No. AEWP 2003-1




 Record created 2017-04-01, last modified 2017-04-04

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