Current Agriculture, Food & Resource Issues
C. E. Ward
margin of remaining viable or being forced to exit an industry. In relatively low-profit
businesses, “small” degrees of market power can have significant profit implications. Even
“small” $/cwt. or percentage impacts represent large total-dollar sums, especially summed
over long time periods. To some, these provide clear targets for antitrust lawsuits, conclusive
evidence of lax antitrust enforcement, and undeniable grounds for corrective legislation.
A related issue revolves around comments made by Sexton (2000) and examined further
in Sexton and Zhang (2001). Given the bi-directional dynamics stemming from structure-
conduct-performance relationships, concentration impacts have implications for resource
distribution over time and for 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. Sexton and Zhang addressed the issue of market power from the standpoint of
adjacent segments of the marketing channel and potential effects on resource distribution.
They argued the emphasis on performance should be broader than simply efficiency, and
should encompass welfare distribution effects as well.
Having spoken to producer groups for 25 years, followed structural changes in
meatpacking during that time, conducted some of the relevant research, and reviewed others’
research pertinent to the issue, I have frequently had a question posed to me: What should be
done or what can be done to reverse the trend? Some people of course want to do nothing
and allow the market to function unencumbered by external regulations and constraints.
Some people want to turn back the clock. They would administratively alter the market
structure where problems seemingly occur, that is, they would break up large meatpacking
firms initially and restrict presumably problematic behavior, i.e., eliminate contracting and
vertical integration. Some people want to treat agriculture as a unique sector of society and
create laws and regulations applicable to agriculture alone, regardless of whether or not they
apply to other sectors of the economy. Relatively little thought is given in many cases to
public and private costs, or to public and private benefits, of these alternatives, even though
the sector is codependent with the rest of the economy.
Evidence of structural changes is clear and conclusive. Research findings on causes and
consequences, while less clear, are relatively robust considering the diversity of data and
myriad of approaches. Economists have contributed relatively little, perhaps as should be the
case, to policy alternatives and prescriptions dealing with structural change issues. Two
divergent alternatives arise implicitly through all the research conducted to date. One is to do
virtually nothing, allow economics to dictate the future, and simply continue conducting
research to measure and monitor the impacts of rising concentration. The other is to
advocate, perhaps without clear research to assess impacts and guide decision-making, for
more intrusive governmental actions aimed at limiting harmful changes and impacts. Neither
may be very satisfying to agricultural producers and policymakers.
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