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

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

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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File URL: http://purl.umn.edu/33583
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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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  1. Duewer, Lawrence A., 1969. "Effects of Specials on Composite Meat Prices," Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, issue 3.
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