Economics at your fingertips  

Oligopsonistic Input Substitution in a Thin Market

Melissa G.S. McKendree, Tina L. Saitone and K. Aleks Schaefer

American Journal of Agricultural Economics, 2021, vol. 103, issue 4, 1414-1432

Abstract: Concerns surrounding horizontal concentration, vertical coordination, regional procurement areas, and resultant thinly traded input markets have beset the U.S. beef industry for decades. In late 2016, Tyson Foods, Inc. announced to its suppliers that it would no longer purchase Holstein cattle at its Joslin, IL harvest facility. This alteration to Tyson's procurement policy provides a unique opportunity to estimate the degree and extent to which a firm‐level decision impacted the beef supply chain. Results indicate that Tyson's decision resulted in a 5.5% (3.5%) reduction in live (dressed) Holstein prices. This impact was immediate, and the updated equilibrium price relationship has persisted. Price impacts were more significant upstream; Holstein feeder cattle prices were reduced by 22% initially and struggled to find a new equilibrium level for more than two years, ultimately stabilizing 4.8% below pre‐announcement levels. We extend the price adjustment analysis to estimate impacts on U.S. Holstein feeder operations' revenues and gross margins, quantifying losses totaling $610 million annually.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

More articles in American Journal of Agricultural Economics from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2021-07-31
Handle: RePEc:wly:ajagec:v:103:y:2021:i:4:p:1414-1432