MARKET DYNAMICS ASSOCIATED WITH A BEEFPACKING PLANT CLOSING AND A PORKPACKING PLANT OPENING

Abstract

Previous research has estimated price effects of meat packing plant closings and openings. However, none have been done for plants opening or closing during the last 20 years ago when concentration in meatpacking increased rapidly. Plant openings and closings affect industry slaughtering capacity. Many analysts contribute the lack of processing capacity to handle the large supply of hogs in 1998 a major factor why spot market hog prices plummeted to unprecedented lows. Just eight months after the capacity constraint in slaughter hogs, Maple Leaf Foods opened a hog processing plant in Brandon, Manitoba. A second but opposite event occurred in the beef industry in an area of concentrated cattle feeding and meatpacking. On Christmas day, 2000, the ConAgra fed cattle processing plant was damaged by fire in Garden City, Kansas. The objective of this research is to determine the market effects of a plant opening in the porkpacking industry and a plant closing in the beef packing industry. Regression models were estimated to compare reported weekly average prices in the market where the plant opened or closed with comparable prices for benchmark markets before and after the plant opening or closing. Regression models followed previous research but explained relatively little of the variation in price ratios between the affected market area and comparison markets. Small price effects were found in some cases but with little consistency.