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Positive Market Effects from a Meatpacking Plant Opening: Perceptions and Reality

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Author Info

  • Hornung, Jonathan T.
  • Ward, Clement E.

Abstract

Economic theory suggests that adding a competitive buyer to a market should have positive effects on competition and prices, ceteris paribus. An additional buyer increases market demand, shifting demand to the right, and expands the number of active buyers, reducing average market shares of existing buyers while intensifying bidding competition. Whether or not these positive impacts occur in reality is an empirical question. The largest pork processor in Canada, Maple Leaf Foods Inc., opened a 45,000 head/week hog processing facility in August 1999 in Brandon, Manitoba. The plant opened during a period of expanding hog production in Canada, of increasing hog exports to the United States, and of increasingly tight processing capacity in the United States (Luby, 1999; Parcell, Mintert, and Plain, 2004). Most previous research on the impacts of meat processing plants has focused on plant closings, and none has estimated the effects of a plant opening under conditions of expanding production and tight processing capacity. Research reported here expands previous work by taking a dual approach to the question. First, two models were used to estimate market price impacts from the plant opening. Second, a survey of Manitoba pork producers provided insight into the perceived market dynamics of the plant opening.

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Bibliographic Info

Article provided by Canadian Agricultural Economics Society in its journal CAFRI: Current Agriculture, Food and Resource Issues.

Volume (Year): (2005)
Issue (Month): 06 ()
Pages:

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Handle: RePEc:ags:cafric:46022

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Web page: http://caes.usask.ca/papers/cafri/index.php
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Related research

Keywords: Agribusiness; Demand and Price Analysis;

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Cited by:
  1. Gervais, Jean-Philippe & Schroeder, Ted C., 2005. "Structural Implications of Persistent Disharmony in North American Beef and Pork Industries," North American Agrifood Market Integration Workshop II: Agrifood Regulatory and Policy Integration under Stress, May 2005, San Antonio, Texas 17998, Farm Foundation.

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