Market Power in the Irish Beef Processing Industry

Liming Wang,Rao Fu,Chenguang Li

doi:10.3390/su13116453

Abstract

Irish beef processors and cattle farmers have been involved in a lasting controversy on power asymmetry. This paper estimates the degree of market power in the Irish beef processing industry. The New Empirical Industrial Organization approach is extended for estimation, and the market power is testified by conjectural elasticity with supply and demand functions, indicating that beef processors exert a significant market power on cattle farms. Export-orientation and high subsidies are two outstanding features in the Irish beef industry. Exports and subsidies are shown in this paper to have an insignificant influence on market power. This paper confirms that beef processors can exercise market power on farmers to lower prices below the marginal cost.

Highlights

The Irish beef sector is Ireland’s largest agricultural sector, involving over 100,000 beef farms
The Irish beef processing sector consists of a few large beef slaughtering firms and many smaller abattoirs, which is similar to the U.S meat packing sector
generalized method of moments (GMM) estimators are known to be more efficient in the condition that the random error term is heteroscedasticity or autocorrelation

Summary

Introduction

The Irish beef sector is Ireland’s largest agricultural sector, involving over 100,000 beef farms. It is one of Ireland’s most important indigenous industries and a vital part of the agri-food sector (Department of Agriculture Food and the Marine (‘DAFM’)). According to Bord Bia (the Irish Food Board), the total production of Irish beef was estimated as. 624,000 tonnes in 2019, valued at €22 billion. This accounted for about 56.68% of the combined value of Irish meat and livestock [1]. In 2019, beef exports (including offal) were valued at €2.1 billion [1]. The Irish beef sector plays a vital role in the Irish economy

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