Beef Packers Research Articles

A novel approach to boxed beef market reports

Boxed beef market reports published by USDA AMS provide current US beef supply and demand information and are the foremost data source for private, government, and academic analysis of the US wholesale beef market. Boxed beef market reporting, in its current form, began in 2001 and the structure has remained largely unchanged. Over the same time, beef commerce has undergone substantial shifts in the types of products and product mix produced by beef packers. As a result, trade of many economically important beef products does not inform published composite values and prices. Weekly USDA published composite prices and values commonly rely on less than half the volume of boxed beef traded. To better inform stakeholders, boxed beef reports need to evolve to match modern beef commerce and leverage the rich data already collected by USDA AMS. This study develops and demonstrates a method whereby USDA AMS could produce novel beef market reports. Specifically, we use boxed beef transaction data collected by AMS to specify hedonic models to estimate implicit market premiums for antibiotic-free ribeye and retail-ready strip loin. The technique can be expanded and adapted to enhance boxed beef market reporting. We conclude with guidance for policy makers involved with ongoing policy discussions that structure USDA AMS data collection and public reports.

Multi‐plant coordination in the U.S. beef packing industry

AbstractMost U.S. beef packers with multiple plants now openly employ multi‐plant coordination. Using a Salop Circular City framework that includes negotiated and formula pricing, we demonstrate that multi‐plant coordination leads to wider spreads between downstream beef prices and upstream fed cattle prices if multi‐plant coordination markdowns outweigh multi‐plant coordination efficiencies. Taken together with market concentration, geography and transportation costs, and cattle cycles and related beef packer capacity utilization, multi‐plant coordination helps explain persistently wide farm‐to‐wholesale beef price spreads. We find that, as cattle inventories decline, a multi‐plant coordinator will permanently shut down a plant before the same plant run as a separate profit center will shut down, which is consistent with packer behavior in recent years. We also demonstrate that adding a strategically‐located packing plant, owned by an entrant firm, can narrow price spreads. This framework is important for ongoing policy discussions regarding the structure, conduct, and performance of the beef packing industry.

Beef price spread relationship with processing capacity utilization

We investigate the relationships of the often-publicized live cattle to box beef price spread and weekly and Saturday slaughter capacity utilization (CU). We find that an increase in the price spread in the previous period does positively impact national Saturday slaughter CU under a low price spread regime, but not in the identified middle and high regimes. Also, changes in weekly or Saturday slaughter CU does not impact the price spread except for the high regime. Our results do not support the notion that weekly, or Saturday slaughter CU is used by the beef packers to control the price spread.

Risk Shifting via Partial Vertical Integration: Beef Packers’ Acquisition of Slaughter Cattle

Risk Shifting via Partial Vertical Integration: Beef Packers’ Acquisition of Slaughter Cattle

Competition issues in the U.S. beef industry

AbstractThis article analyzes the dynamics of the U.S. beef industry in light of the alleged input and output price‐fixing cartel of the four largest beef packers revealed in the antitrust lawsuits filed by fed cattle producers and beef buyers in 2019. Empirical evidence suggests that beef production, the farm, wholesale, and retail values of beef, and marketing margins increased, but farm sector share decreased in the cartel period (2015–2019), as compared with a prior period (2010–2014). The wholesale beef pricing by beef packers shifted from being consistent with a perfectly competitive industry pricing in the pre‐cartel period to being consistent with the oligopoly and monopoly pricing in the cartel period. The retail beef pricing by food retailers was consistent with an oligopoly pricing in both periods. Beef packers and food retailers shifted to an output (beef) price stabilization practice in the cartel period.

COVID‐19 and the Canadian cattle/beef sector: A second look

After a year of adjusting to the shocks associated with COVID‐19 the Canadian cattle and beef sector faces a relatively optimistic future. This note examines the past year for this supply chain from the perspective of the consumer up to the cow‐calf producer by considering consumer reactions, labor market constraints, and supply responses. In the second quarter of 2020, the sector faced a significant challenge with continent wide shutdowns of beef packers reducing the U.S. beef supply by one‐third and Canadian beef slaughter by almost 60%. These shutdowns resulted in a sharp divergence between wholesale beef prices, which more than doubled, and fed steer prices, which declined by one third. Despite these dramatic shocks, the sector has returned to near normal conditions with prices and production levels similar to those observed prior to the pandemic. The near term prospects for 2021 are very similar to the current market situation.

Information flow in the Sino-Brazilian beef trade

Considering the opportunities offered by the Chinese beef market and the fragilities in the Sino-Brazilian beef trade supply chain, this study aims to identify the main sources and channels used by Brazilian beef packers to obtain information on the Chinese market. The results reveal that the Brazilian beef packers and institutions within the export sector have little knowledge regarding the Chinese market. Neither the size nor the export experience of the beef packing firms and the foreign direct investment seem to significantly influence the quality of the knowledge they hold on the Chinese beef market. The sector has neither an integrated database containing the essential information on the Chinese market nor a unified traceability system in place that could facilitate the information flow among the agents within the beef supply chain. Consequently, firms need to dedicate substantial management resources (time, financial and human) to collect information from various sources.

A Stochastic Production Frontier Estimator of the Degree of Oligopsony Power in the U.S. Cattle Industry

The objective of this study is to estimate the degree of oligopsony power in the U.S. cattle industry with the use of the recently developed stochastic frontier estimator of market power. Unlike the seminal paper where estimation of the mark-up in an output market at firm level was the main objective, this work proposes a stochastic production frontier estimator in order to estimate the mark-down in an input market at aggregate level. Furthermore, with the help of the new estimator we derive and estimate the Lerner index of oligospony power for the U.S. cattle market. For the empirical part of the study we employed annual time series data from the U.S. cattle/beef industry for the time period 1970-2009. Our results suggest that beef packers exert market power when purchasing live cattle for slaughter.

Changes in Beef Packers' Market Power after the Livestock Mandatory Price Reporting Act: An Agent‐based Auction

Controversy remains about the effectiveness of the 1999 Livestock Mandatory Price Reporting Act (MPRA). We determine the likely changes in beef packers' market power after the MPRA by using an agent‐based, first‐price common‐value auction. Past research has employed Cournot models, but we use an auction model, which more closely resembles the actual cattle procurement process. We find that feeders benefit from the MPRA regardless of whether price uncertainty decreases for packers and/or feeders. If the packers' price uncertainty is reduced, the feeder benefits from an increase in competition between the packers. If the feeder's price uncertainty is reduced, the feeder benefits from imposing more accurate reserve prices.

Managing a Border Threat: BSE and COOL Effects on the Canadian Beef Industry

The Canadian cattle and beef industry incurred severe losses when exports to the United States were halted after the May 2003 discovery of bovine spongiform encephalopathy in a Canadian cow. Although trade in cattle and beef products slowly returned to normal, the potential for upheaval returned when country of origin labeling became mandatory in March 2009. Industry observers fear segregation costs could result in refusal of Canadian cattle by American beef packers. As a result, some industry stakeholders are promoting an expansion of slaughter capacity. This teaching case study focuses on the decision of whether to support such an initiative. Copyright 2009 Agricultural and Applied Economics Association

Legal and Economic Issues with the Courts' Rulings in Pickett v. Tyson Fresh Meats, Inc., a Buyer Power Case

In the historic cattle trial, Pickett v Tyson Fresh Meats, Inc., Plaintiff cattlemen alleged that Tyson/IBP used captive (contracted) supplies of cat tle ready for slaughter to manipulate the cash market, in violation of the 1921 Packers & Sto ckyards Act (PSA). After a five week Trial in Federal Court, the Jury found Tyson/IBP guilty o n all counts and assessed actual damages of $1.28 billion, which applied to a large but unspeci fied number of cattle, likely 10-50 million head. Justice for Plaintiff cattlemen was short, as the T rial Judge set aside the Jury’s verdict—a rare but not unprecedented legal action—and entered summary judgment for Tyson. The Eleventh Appellate Court subsequently sided with the Trial J udge. In 2006, the United States Supreme Court denied without comment Plaintiff’s Petition t o rehear the case, thus ending legal activities in Pickett v Tyson and effectively killing similar legal action pending un der the same Trial Judge against two other major beef packers, E xcel (Cargill) and Swift (ConAgra). Together the three packers account for over 70% of fed cattle slaughter. In essence Pickett was filed under the PSA, tried under Sherman and Clayton antitrust law, and overturned, in part, under the Robinson-Patman Act, with the Trial Court and the Appellate Court implicitly appointing themselves as fact-find ers. This is not how the American judicial and legislative system is supposed to function. The Courts gave a narrow and extreme interpretation to the antitrust rule of reason and to the meaning of “unfair” in the PSA. The PSA as well as the Sherman and Clayton Acts may be greatly weakened if not essentially repealed if the Courts’ Opinions in Pickett come to dominate case law.

Proving Anti-Competitive Conduct in the U.S. Courtroom: Economic Issues with the Courts' Opinions in Pickett v. Tyson Fresh Meats, Inc.

Four articles have been published in this Journal about the historic cattle trial, Pickett v Tyson Fresh Meats, Inc., in which Plaintiff cattlemen alleged that Tyson/IBP—the buyer—used captive (contracted) supplies of cattle to manipulate the cash market in violation of the 1921 Packers & Stockyards Act (PSA). The first article gave a Trial's eye view by David Domina who served as co-lead counsel representing Plaintiff cattlemen. Domina's article led to a published comment by Thomas Green who was the lead attorney representing Tyson during the Trial phase of lengthy legal proceedings. Green alleged that Domina's article was "littered with rank speculation and baseless opinion." Domina countered that "proof is not litter, and evidence is not rank speculation" and that Green's commentary was "abusive." The adversarial exchange between Domina and Green was followed by another advocacy article in which William Rosales maintained that Pickett "represents an opportunity for the judiciary to reform the meatpacking industry (and) awaken the (PSA's) intended power to dethrone the economic kings of the meatpacking industry."After a five week Trial in Federal Court, the Jury found Tyson/IBP guilty on all counts and assessed actual damages of $1.28 billion over 2/1994 -10/2002. Justice for Plaintiff cattlemen was short, as the Trial Judge set aside the Jury's verdict—a rare but not unprecedented legal action—and entered summary judgment for Tyson. The Eleventh Appellate Court subsequently sided with the Trial Judge. On March 24, 2006, the United States Supreme Court denied without comment Plaintiff's Petition to rehear the case, thus ending legal activities in Pickett v Tyson and effectively killing similar legal action pending against two other major beef packers, Excel (Cargill) and Swift (ConAgra).This article emphasizes three significant and troubling legal and economic issues from the historic litigation: (1) the Courts' narrow and extreme interpretation of the antitrust rule-of-reason; (2) the Courts' endorsement of a "meeting the competition" defense, and (3) whether the Courts inserted themselves above the Jury as fact-finders in the case, contrary to the 7th Amendment to the U.S. Constitution that establishes the Jury as the only fact-finder in civil litigation.In essence Pickett was filed under the Packers and Stockyards Act, tried under Sherman and Clayton antitrust law, and overturned, in part, under the Robinson-Patman Act.

Cases in the environment of business: international perspectives

Introduction to the Ivey Casebook Series - Paul W. Beamish Preface Introduction 1. The Dependence of Profitability on Industry Structure Samsung and the Theme Park Industry in Korea PharmaPlus in Hungary Singapore International Air Lines: Preparing for Turbulence Ahead Swatch and the Global Watch Industry Whirlpool Corporation's Global Strategy Wal-Mart Stores Inc.: Dominating Global Retailing The Global Branding of Stella Artois 2. Understanding and Managing Macroeconomic Risks A Global Manager's Guide to Currency Risk Management Chauvco Resources Ltd: The Argentina Decisions Crisis in Japan Procter & Gamble in Eastern Europe (A) Bank Vozrozhdeniye (V.Bank) ING and Global Financial Integration 3. Managing Within Alternative Government Structures Mekong Corporation and the Viet Nam Motor Vehicle Industry Thai Telecoms in the New Economy: Privatization & Liberalization Lucent in India Citigroup in Post-WTO China Point Lisas Industrial Estate: Trinidad Dell's Dilemma in Brazil: Negotiating at the State Level Enron and the Dabhol Power Company Bombardier Versus Embraer: Charges of Unfair Competition 4. Responding to Societal Forces John McCulloch--United Beef Packers NES China: Business Ethics (A) NES China: Business Ethics (B) Textron Ltd. Note on the Pollution Problem in the Mexico-U.S. Border Region Planet Starbucks (A) Siam Canadian Foods Co., Ltd. Royal Trustco 5. Investment Decisions in the Context of Technological Changes Privatizing Poland's Telecom Industry: Opportunities and Challenges in the New Economy and E-Business Malaysia's Multimedia Development Corporation Global Warming and the Kyoto Protocol: Implications for Business Enron Wind Corporation: Challenges and Opportunities in the 21st Century Eurograin (Philippines) and Hybrid Corn Shire Pharmaceuticals Group's Acquisition of BioChem Pharma: Broadening Product Portfolio and Achieving Economies of Scale in Pharmaceuticals 6. Integrative Cases GM in China Intel's Site Selection Decision in Latin America The Acer Group's China Manufacturing Decision References About the Editor

CONSUMER PREFERENCES FOR PATHOGEN‐REDUCING TECHNOLOGIES IN BEEF1

ABSTRACT Two surveys were conducted by mail to evaluate consumers’ preferences for beef treated by the steam and hot‐water pasteurization technologies, in a comparison with beef treated by irradiation and nontechnology treated “regular” beef. More than 64% of the respondents reported that they preferred ground beef treated by irradiation to that treated by the two pathogen‐reducing technologies. More than 87% of the respondents stated that they preferred ground beef treated by the two technologies to nontechnology treated beef. Sixty percent of the respondents reported that they were willing to pay for beef treated by the two pathogen‐reducing technologies with an averaged willingness‐to‐pay of 0.36/lb over nontechnology treated beef. Compared with their counterparts; women, those having a better self‐reported health status, and those with children at home (≥ 18 years of age) were more likely to report a preference for beef treated by the two heat‐related pasteurization technologies. The income level of the respondents was negatively associated with their preference for beef treated by the two heat‐related pasteurization technologies. The strong consumer preference coupled with willingness‐to‐pay for beef treated by the two pathogen‐reducing technologies, suggest that consumers are willing to bear the cost of using these technologies if beef packers would invest in such technologies as a means of improving the quality of their products.

Factors Affecting Live Cattle Basis

AbstractCattle producers and beef packers need to understand basis determinants as they develop price expectations and make pricing, hedging, and forward contracting decisions. This study empirically estimated factors explaining variability in monthly fed cattle basis. The five main results regarding live cattle basis are 1) corn price is an important determinant, 2) a change in the value of the Choice-to-Select spread positively affects basis, 3) changes in the levels of captive supplies have no significant statistical or economic impact on basis, 4) the June 1995 live cattle futures contract did not impact basis, and 5) both market fundamentals and seasonal components are important basis determinants.

Estimated Value of Increased Pricing Accuracy for Fed Cattle

To improve vertical market coordination beef packers have introduced fed cattle grid pricing systems that offer premiums or discounts for varying carcass quality and yield grades. This study calculates the value of cattle quality information for producers considering live, dressed, and grid pricing alternatives. The value of fed cattle quality and yield grade information is at least $15/head. When fed cattle are sold on a live weight basis, high-quality cattle subsidize low-quality cattle by an average of $30/head. Price signals that could improve beef market coordination are ignored when fed cattle are marketed using traditional live or dressed weight methods.

Measuring Market Power in Bilateral Oligopoly: The Wholesale Market for Beef

Econometric methods for assessing the degree of market power typically rely on a maintained hypothesis of price-taking behavior on one side of the market or the other. In the analysis of bilateral oligopoly, however, one would like to leave open the question of whether buyers or sellers (or both) behave competitively while allowing for the possible exercise of market power on either side. In this paper, we address the problem of measuring market power in bilateral oligopoly. This requires that we first distinguish among three candidate equilibrium concepts: bilateral price-taking, seller price-taking, and buyer price-taking. Choosing among them comes down to a test of nonnested, nonlinear, simultaneous equation models. Our application to the U.S. wholesale market for beef, characterized by high degrees of concentration among both sellers (beef packers) and buyers (primarily retail grocery chains), reveals seller price-taking among the three candidates to be the most consistent with the data. In particular, the hypothesis of price-taking conduct on both sides of the market can be rejected. This is a conclusion that would not have been reached had we considered monopoly conduct by sellers as the only alternative to perfect competition.

Measuring Market Power in Bilateral Oligopoly: The Wholesale Market for Beef

Econometric methods for assessing the degree of market power typically rely on a maintained hypothesis of price‐taking behavior on one side of the market or the other. In the analysis of bilateral oligopoly, however, one would like to leave open the question of whether buyers or sellers (or both) behave competitively while allowing for the possible exercise of market power on either side. In this paper, we address the problem of measuring market power in bilateral oligopoly. This requires that we first distinguish among three candidate equilibrium concepts: bilateral price‐taking, seller price‐taking, and buyer price‐taking. Choosing among them comes down to a test of nonnested, nonlinear, simultaneous equation models. Our application to the U.S. wholesale market for beef, characterized by high degrees of concentration among both sellers (beef packers) and buyers (primarily retail grocery chains), reveals seller price‐taking among the three candidates to be the most consistent with the data. In particular, the hypothesis of price‐taking conduct on both sides of the market can be rejected. This is a conclusion that would not have been reached had we considered monopoly conduct by sellers as the only alternative to perfect competition.

Influence of body condition score on live and carcass value of cull beef cows.

Mature beef cows (n = 88) were slaughtered to determine the influence of body condition score (BCS) on carcass and live animal value. Cows were weighed and assigned a BCS (9-point scale), 24 h before slaughter. Hide and by-products weights were recorded during harvest. After a 48-h chill period, the right side of each carcass was fabricated into boneless subprimal cuts, minor cuts, lean trim, fat, and bone. Weights were recorded at all stages of fabrication. Carcass values (U.S.$/100 kg of hot carcass weight) were calculated for U.S. Utility and U.S. Cutter grades, as well as for the Utility/Cutter mix for each BCS. Gross value included the carcass value and the value of the hide and byproducts, whereas net value was calculated after harvest and fabrication costs and by-product value were considered. Live value (U.S.$/100 kg of live weight) was computed by dividing the net value by the animal's live weight 24 h before harvest. The value of the hide and by-products for BCS-2 cows was greater (P<.05) than for cows assigned a BCS of 3 through 8. Even though U.S. Utility carcasses from BCS-8 cows produced the least (P<.05) valuable subprimal cuts from the chuck, loin, and round, the gross and net values of BCS-8 cows were greater (P<.05) than those of BCS-3, 4, 5, and 6. Within the grade of U.S. Cutter, carcasses from BCS-6 cows had the highest (P<.05), and BCS-2 cows had the lowest (P<.05), gross and net values. Across the U.S. Utility/Cutter mix, cows designated with a BCS of 7 and 8 had greater (P<.05) gross and net values than cows assigned a BCS of 6, or lower. Live value increased linearly (P = .0002) from a low of $76.10/100 kg for BCS-2 cows to a high of $90.84/100 kg for BCS-7 cows. Carcasses from BCS-6 cows were relatively lean (8.4 mm of fat opposite of the longissimus muscle), and approximately 73% of the carcasses achieved a quality grade of U.S. Utility. Moreover, carcasses from BCS-6 cows had the highest total carcass values and live values comparable (P>.05) to BCS-7 cows. Information from this study can be used by the non-fed beef industry to establish a value-based marketing system. Data from this study would indicate that marketing cull beef cows at a BCS of 6 could optimize economic returns to both cow-calf producers and non-fed beef packers.

Design and application of a cusum quality control chart suitable for monitoring effects on ultimate muscle pH

The cumulative sum, or cusum, chart is introduced for on‐farm monitoring of meat quality traits. The average time over which production is satisfactory or in control (average run length) is defined for the cusum chart and the calculation of this statistic discussed. Data from 9958 Angus and Hereford steers slaughtered at Manawatu Beef Packers (AFFCO) between February 1993 and February 1994 were used to calculate fixed effects and a frequency distribution representing uncontrollable variation in ultimate muscle pH. A cusum chart for on‐farm monitoring of ultimate muscle pH is constructed from this information. A procedure is given for correcting the cumulative sums of unequal sample sizes to a measure suitable for on‐farm monitoring of traits of interest. The role of the cusum chart as an objective tool in farm monitoring programs is discussed, especially for applications of improvement in the quality of carcasses supplied by a farmer to a meat processor.