Trends in the U.S. Food‐Processing Industry: Implications for Modeling and Policy Analysis in a Dynamic Interactive Environment

Abstract

The evolving changes in demand, industry structure, and technology evident in the U.S. food-processing industry, identified in this session by Connor, Heien, Kinsey, and Wills and Sanderson and Schweigert have significant implications for agricultural economic analysis. It is evident that the food-processing industry is increasingly dynamic, interacts extensively with the farm and consumer sectors, is being integrated into nonagricultural industries, and continues to expand its international dimensions. Equally important as these trends in shaping the future are constraints imposed by microand macropolicies. Given industry dynamics and complex policy interactions, it is likely that traditional static competitive models for evaluating firm and industry performance may be inappropriate. This paper examines the implications of industry dynamics for economic analysis of the food-processing industry and develops a framework of the interactive policy environment in which the industry operates. Within this framework, implications of some key policy variables are explored to suggest their importance to empirical models.