PERFORMANCE EVALUATION OF THE U.S. HOG SLAUGHTER INDUSTRY

J. Bruce Bullock

No 26044, Working Papers from University of Missouri Columbia, Department of Agricultural Economics

Abstract: 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.

Keywords: Agribusiness; Industrial Organization; Livestock Production/Industries (search for similar items in EconPapers)
Pages: 22
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:ags:umcowp:26044

DOI: 10.22004/ag.econ.26044

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