Investigating market power in the Belgian pork production chain

Dries Maes, Mark Vancauteren and Steven Van Passel

Review of Agricultural, Food and Environmental Studies, 2019, vol. 100, issue 01-4

Abstract: Belgian pork production has faced stagnating prices for decades. It remains unclearwhether excessive market power from slaughterhouses or meat retailers has played arole in this trend. While market power studies can reveal some of the market dynamicsin this setting, this type of research has not yet been applied to the Belgian pork market.The present paper investigates oligopolies and oligopsonies in the pork productionsector. We build a new model that focuses on market power dynamics in the market forlive pigs and distinguishes horizontal and vertical market power parameters, both forpig farmers and for slaughterhouses. The results follow from an empirical applicationusing unique slaughterhouse data for 2001–2015. The results indicate that the farmersbenefit from a significant power advantage in the live pig market, when very modestprice demands are taken as a reference. The final market price of live pigs approachesthe price requested by the farmers. On the other hand, the measured vertical marketpower also suggests that a pig farmer does not receive the (modest) full-wage-basedsalary. The market power of the slaughterhouses is also limited. Market power as aresult of collusion—that is, horizontal market power—is present, but is not strong.However, there are significant differences between the slaughterhouses in terms ofmark-up on the input prices. These differences reflect differences in company strategy,and this diversity further reduces the possibility to create sector-wide collusivebehaviour.

Keywords: Industrial Organization; Livestock Production/Industries (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:frrfes:308882

DOI: 10.22004/ag.econ.308882

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