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U.S. Beef Industry: Cattle Cycles, Price Spreads, and Packer Concentration

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Author Info

  • Mathews, Kenneth H., Jr.
  • Hahn, William F.
  • Nelson, Kenneth E.
  • Duewer, Lawrence A.
  • Gustafson, Ronald A.

Abstract

In early 1996, the peak in the current cycle of cattle inventories coincided with a long list of negative factors--negative returns at the farm and feedlot, record-high feed grain prices, a severe drought in 1995-96, widening farm-retail price spreads, a low farmers' share of the consumers' Choice beef dollar, and reports of high profits for beefpackers. This confluence created an atmosphere in which some producers and members of Congress questioned whether the cattle industry was adversely affected by high packer concentration and market power. In this report, we examine the cattle cycle of the 1990's to determine if there are differences from previous cattle cycles and, if so, how and why they are different. We found that values for many variables at the 1996 cyclical peak in cattle inventories, while bad, were not the worst on record. Further, price levels during the cattle cycle of the 1990's were better, our models suggest, than they could have been, given earlier patterns of price adjustment. Finally, despite the growth of packer concentration, we failed to demonstrate large negative effects of packer concentration on cattle prices during the 1991-to-present cattle cycle.

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Bibliographic Info

Paper provided by United States Department of Agriculture, Economic Research Service in its series Technical Bulletins with number 33583.

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Date of creation: 1999
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Handle: RePEc:ags:uerstb:33583

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Related research

Keywords: cattle cycles; price spreads; packer concentration; cattle slaughter; steer and heifer slaughter; cow slaughter; Livestock Production/Industries;

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Cited by:
  1. Leroux, Nicole & Wortman, Max S., Jr. & Mathias, Eric D., 2001. "Dominant Factors Impacting The Development Of Business-To-Business (B2b) E-Commerce In Agriculture," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 4(02).
  2. Sayed H. Saghaian, 2007. "Beef safety shocks and dynamics of vertical price adjustment: The case of BSE discovery in the U.S. beef sector," Agribusiness, John Wiley & Sons, Ltd., vol. 23(3), pages 333-348.
  3. David Aadland, 2001. "Cattle Cycles, Heterogeneous Expectations and the Age Distribution of Capital," Working Papers 2002-02, Utah State University, Department of Economics.
  4. David Aadland, . "The economics of cattle supply," Working Papers 2000-11, Utah State University, Department of Economics.
  5. Colette, W. Arden & Almas, Lal K. & Hittle, Chad A., 2003. "Utilizing Expected Revenue In Selecting Optimal Marketing Alternatives For Fixed Resource Cow/Calf Operators In The Texas Panhandle," 2003 Annual Meeting, February 1-5, 2003, Mobile, Alabama 35187, Southern Agricultural Economics Association.
  6. Arunas Juska & Lourdes Gouveia & Jackie Gabriel & Kathleen Stanley, 2003. "Manufacturing bacteriological contamination outbreaks in industrialized meat production systems: The case of E. coli O157:H7," Agriculture and Human Values, Springer, vol. 20(1), pages 3-19, March.

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