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

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  • 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.

Suggested Citation

  • Hornung, Jonathan T. & Ward, Clement E., 2005. "Positive Market Effects from a Meatpacking Plant Opening: Perceptions and Reality," CAFRI: Current Agriculture, Food and Resource Issues, Canadian Agricultural Economics Society, issue 6, pages 1-10, March.
  • Handle: RePEc:ags:cafric:46022
    DOI: 10.22004/ag.econ.46022
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    References listed on IDEAS

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    1. Sarah Grunewald & Ted C. Schroeder & Clement E. Ward, 2004. "Cattle Feeder Perceptions of Livestock Mandatory Price Reporting," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 26(4), pages 521-538.
    2. Ward, Clement E., 2002. "A Review of Causes for and Consequences of Economic Concentration in the U.S. Meatpacking Industry," CAFRI: Current Agriculture, Food and Resource Issues, Canadian Agricultural Economics Society, issue 3, pages 1-28, January.
    3. Parcell, Joseph L. & Mintert, James R. & Plain, Ronald L., 2004. "An Empirical Investigation of Live-Hog Demand," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(3), pages 1-15, December.
    4. Carlberg, Jared G. & Ward, Clement E., 2003. "Alternative Theories and Empirical Approaches to Price Discovery: An Application to Fed Cattle," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 35(3), pages 1-13, December.
    5. Roger A. Dahlgran & Dean G. Fairchild, 2002. "The demand impacts of chicken contamination publicity-a case study," Agribusiness, John Wiley & Sons, Ltd., vol. 18(4), pages 459-474.
    6. Misra, Sukant K. & Huang, Chung L. & Ott, Stephen L., 1991. "Consumer Willingness To Pay For Pesticide-Free Fresh Produce," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(2), pages 1-10, December.
    7. Donald W. Anderson & Brian C. Murray & Jackqueline L. Teague & Richard C. Lindrooth, 1998. "Exit from the Meatpacking Industry: A Microdata Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 96-106.
    8. Marc Nerlove, 1958. "Distributed lags and Estimation of Long-Run Supply and Demand Elasticities: Theoretical Considerations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 40(2), pages 301-310.
    9. Harold G. Love & D. Milton Shuffett, 1965. "Short-Run Price Effects of a Structural Change in a Terminal Market for Hogs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 47(3), pages 803-812.
    10. Deiter, Ronald E. & Montoya, Cristobal & Hayenga, Marvin L., 1986. "Price Impacts Associated with the Closing of Hog Slaughtering Plants," Staff General Research Papers Archive 11081, Iowa State University, Department of Economics.
    11. Carlberg, Jared G. & Ward, Clement E., 2003. "Alternative Theories and Empirical Approaches to Price Discovery: An Application to Fed Cattle," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 35(3), pages 649-661, December.
    12. Hayenga, Marvin & Deiter, Ronald & Montoya, Cristobal, 1986. "Price Impacts Associated with the Closing of Hog Slaughtering Plants," ISU General Staff Papers 198607010700001497, Iowa State University, Department of Economics.
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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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