Current Agriculture, Food & Resource Issues
C. E. Ward
there that economic behavior has shifted from competitive to non-competitive? What
evidence is there that structural and behavioral changes have resulted in adverse economic
performance? This paper reviews the available data and information pertaining to these
questions and provides some insight into the answers. Structural changes are reviewed, along
with discussion of one major causal factor for the changes. Then, numerous studies
conducted over the past twenty years are reviewed, i.e., studies carried out at different times
with alternative approaches and varying levels of data aggregation.
Implications and Conclusions
The research undertaken on structural change in the packing industry varies widely in
terms of data, i.e., data unit aggregation (transactions to annual observations), collection
length (one month to decades), and spatial aggregation (local market to the entire United
States), as well as methodological approach, i.e., econometric estimation of models with
several functional forms, simulation, game theory, conjectural variation, and combinations
thereof. Once conclusion is clear - there is a dynamic, bi-directional linkage between
structure, conduct, and performance.
Two additional issues also emerge from the research. The first centres on the fact that
most of the research leads to questions of the form, “How large is large?” or “How small is
small?” Price distortions of 3 percent or less were found in most studies. While these fall well
short of regulatory agency standards related to merger impacts and non-competitive behavior,
even seemingly small impacts on a $/cwt. basis may make a substantial difference to livestock
producers and rival meatpacking firms operating at the margin of remaining viable or being
forced to exit an industry.
A related issue revolves around the effects concentration will have on resource
distribution over time and on the future structure of agriculture, both the production sector
and the broader food sector, including processing and distribution segments. A short glance
at the recent history of the livestock feeding and meatpacking industries should provide
convincing evidence of the inter-relatedness among causes and consequences of structural
changes.
Structural Changes Reviewed
Only after considerable further investigation will we know whether or not
reform in the packing industry is necessary. It is conceivable that such
monopoly elements as exist yield desirable results. A less extreme possibility
is that results are undesirable but not sufficiently bad to bother about.
(Nicholls, 1940)
Structural changes in the beef industry preceded similar changes in the pork industry. This
review of structural changes focuses on steer and heifer slaughtering and fabricating and hog
slaughtering.