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Market Power in Poultry Production Contracting? Evidence from a Farm Survey

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

Abstract

The exercise of market power by broiler processing firms (integrators) is plausible because local markets for growers are concentrated and because growers face hold-up risks arising from substantial investments in specific assets set against limited integrator purchase commitments. This article explores the links between local integrator concentration and grower compensation under production contracts using data from the 2006 broiler version of the USDA’s Agricultural Resource Management Survey. Results of this study, which account for characteristics of the operation and specific features of the production contract, suggest that greater integrator concentration results in a small but economically meaningful reduction in grower compensation.

Suggested Citation

  • MacDonald, James M. & Key, Nigel D., 2012. "Market Power in Poultry Production Contracting? Evidence from a Farm Survey," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 44(4), pages 1-14, November.
    • Handle: RePEc:ags:joaaec:137136
    DOI: 10.22004/ag.econ.137136
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    References listed on IDEAS

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    1. James M. MacDonald & Sun-Ling Wang, 2011. "Foregoing Sub-therapeutic Antibiotics: the Impact on Broiler Grow-out Operations," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 79-98.
    2. MacDonald, James M., 2008. "The Economic Organization of U.S. Broiler Production," Economic Information Bulletin 58627, United States Department of Agriculture, Economic Research Service.
    3. Sexton, Richard J. & Lavoie, Nathalie, 2001. "Food processing and distribution: An industrial organization approach," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 15, pages 863-932, Elsevier.
    4. Theofanis Tsoulouhas & Tomislav Vukina, 2001. "Regulating Broiler Contracts: Tournaments Versus Fixed Performance Standards," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 1062-1073.
    5. James M. MacDonald & Charles R. Handy & Gerald E. Plato, 2002. "Competition and Prices in USDA Commodity Procurement," Southern Economic Journal, John Wiley & Sons, vol. 69(1), pages 128-143, July.
    6. Tomislav Vukina & Porametr Leegomonchai, 2006. "Oligopsony Power, Asset Specificity, and Hold-Up: Evidence from the Broiler Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 589-605.
    7. Hoppe, Robert A. & Korb, Penelope J. & O'Donoghue, Erik J. & Banker, David E., 2007. "Structure and Finances of U.S. Farms: Family Farm Report, 2007 Edition," Economic Information Bulletin 59032, United States Department of Agriculture, Economic Research Service.
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    Cited by:

    1. MacDonald, James M., 2014. "Technology, Organization, and Financial Performance in U.S. Broiler Production," Economic Information Bulletin 262121, United States Department of Agriculture, Economic Research Service.
    2. Federica Di Marcantonio & Pavel Ciaian & Vicente Castellanos, 2018. "Unfair trading practices in the dairy farm sector: Evidence from selected EU regions," JRC Research Reports JRC112770, Joint Research Centre.
    3. MacDonald, James M. & Dong, Xiao & Fuglie, Keith O., 2023. "Concentration and Competition in U.S. Agribusiness," Economic Information Bulletin 337566, United States Department of Agriculture, Economic Research Service.
    4. Di Marcantonio, F. & Ciaian, P. & Castellanos, V., 2018. "Unfair trading practices in the dairy farm sector: Insights from an EU field survey," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 275886, International Association of Agricultural Economists.
    5. Luckstead, Jeff & Devadoss, Stephen & Mittelhammer, Ron C., 2014. "Apple Export Competition between the United States and China in the Association of Southeast Asian Nations," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 46(4), pages 635-647, November.
    6. Stephen F. Hamilton & David L. Sunding, 2021. "Joint Oligopsony‐Oligopoly Power in Food Processing Industries: Application to the us Broiler Industry," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(4), pages 1398-1413, August.

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    More about this item

    Keywords

    Marketing;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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