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Local Monopsony Power in the Market for Broilers - Evidence from a Farm Survey

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  • Key, Nigel D.
  • MacDonald, James M.

Abstract

The exercise of monopsony power by broiler processing firms is plausible because production occurs within localized complexes, which limits the number of integrators with whom growers can contract. In addition, growers face distinct hold-up risks as broiler production requires a substantial investment in specific assets and most production contracts do not involve long-term purchasing commitments by integrators. This paper provides an initial exploration of the links between the local concentration of broiler integrators and grower compensation under production contracts using data from the 2006 broiler version of USDA’s Agricultural Resource Management Survey. Results of this preliminary study, which accounts for characteristics of the operation and specific features of the production contract, suggest a small but economically meaningful effect of concentration on grower concentration. Limitations of the current analysis and future possible model extensions are discussed.

Suggested Citation

  • Key, Nigel D. & MacDonald, James M., 2008. "Local Monopsony Power in the Market for Broilers - Evidence from a Farm Survey," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6073, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea08:6073
    DOI: 10.22004/ag.econ.6073
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    References listed on IDEAS

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    Cited by:

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    2. Liang, Jing & Fabiosa, Jacinto F. & Jensen, Helen H. & Miller, Gay Y., 2010. "Potential HPAI Shocks and Welfare Implications of Market Power in the U.S. Broiler Industry," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61496, Agricultural and Applied Economics Association.
    3. Richard Volpe & Maiah Alman & Xiaowei Cai & Alexander Stevens, 2022. "Retail Mergers and Acquisitions, and Specialty Crop Producers: Evidence from California," Sustainability, MDPI, vol. 14(7), pages 1-13, March.

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    Keywords

    Livestock Production/Industries; Marketing;

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