Market power in the United States red meatpacking industry.

Abstract

All agricultural production, processing, marketing, food retail, and agricultural input service sectors are becoming increasingly concentrated; that is, populated by fewer and larger firms. This appears to be a universal condition in the agriculture and food sectors of the United States economy. In fact, it is difficult to identify an agricultural industry or industry subsector where increasing concentration is not the case. The United States meatpacking industry, however, draws some of the most intense criticism with respect to this ubiquitous trend. Some of this criticism is deserved because the United States meatpacking industry is one of the most concentrated. Producers and policy makers are concerned that this economic environment results in the exercise of market power by firms to the detriment of producers and consumers. This article presents research evidence addressing this persistent and important question: Is there evidence that meatpacking firms exercise market power? To place the question in context, structural change in United States meatpacking is also discussed. (For more detailed information on structural change and its causes, see the article by MacDonald elsewhere in this issue.) Specifically, this article addresses the following questions: What evidence is there that economic behavior in the United States red meatpacking sector is noncompetitive? What evidence is there that structural changes and conduct have resulted in adverse economic performance? This article reviews a large portion of the research pertaining to these questions and provides some interpretive insights as to the answers. A number of studies that have been conducted over the past 20 years are reviewed. Although the studies use alternative approaches and varying data sources, the conclusion appears to be consistent.