Concentration in the Red Meat Packing Industry

Organization of Report: This report summarizes the work of the contractors. Their objectives, research methods and procedures, data used, and results are presented for each project. Portions of the respective chapters draw liberally from the contractors' reports to GIPSA, with some language from the contractors' reports. Also included at the end of each chapter is a synopsis that includes GIPSA's assessment of the research findings. Chapter 1 -- examines regional cattle procurement markets. Market definitions are relevant for analyses of the effects of concentration on prices paid and for monitoring competitive behavior. GAO also recommended that GIPSA define relevant procurement markets. Chapter 2 -- examines procurement and pricing patterns of beef packers. Chapter 3 -- looks at the role of captive supplies in beef packing. Industry observers and participants frequently express concern about packers' use of captive supplies. This project assesses potential impacts. Chapter 4 -- analyzes the effects of concentration on prices paid for cattle. Concentration is generally thought to increase potential for firms to use market power. Chapter 5 -- addresses vertical coordination in hog production. Vertical coordination is increasing in hog production. Production contracts are growing rapidly in the Southeast and other areas, and marketing contracts are becoming more prevalent in the Midwest. This project looks at trends in vertical arrangements. Chapter 6 -- examines hog procurement in the eastern Corn Belt. The project examined procurement records of packers in the eastern Corn Belt to learn if prices are affected by distance from packing plants, the presence of competing packers, and other factors. Chapter 7 -- reports on the findings of the literature review. Chapter 8 -- summarizes the study. The appendices contain additional details about the data collection and a list of references reviewed in the literature review project.