An analysis of marketing margins in the US beef industry
Abstract
The US beef industry has undergone significant structural changes in the last 30 years at the wholesale and retail levels. Meanwhile producer prices have failed to keep pace with increases in the price of beef received by wholesalers and retailers, resulting in concerns being raised about market power being exercised in the beef industry by stakeholders. This study uses marketing margins to determine what factors affect margins, test for differences among different procurement methods of purchasing cattle, and test for differences among different cuts of beef. This paper extends previous research providing more detail regarding the factors that may effect margins and differentiating by not just looking at aggregate margins between producers and wholesalers, and wholesalers and retailers. The results suggest that for margins between wholesalers and retailers industry concentration measures do appear to have statistically significant effect on margins for some products. While an increase in wholesaler concentration does not appear to contribute to increases in producer wholesaler margins. Likewise due to this insignificance, cost efficiencies achieved from this strategy may be exhausted. Evidence indicates that cost variables do have an effect on margins between wholesalers and retailers although, the magnitude of their effect on margins may be linked to the value US consumers place on different cuts. For instance, low value cuts such as ground beef were more sensitive to a change in diesel prices compared to higher value cuts such as steak rounds. While four-firm concentration ratios were significant for products such as ground beef and steak, they are not significant for round roast or steak round products.
Degree
M.S.
Advisors
Gunderson, Purdue University.
Subject Area
Agricultural economics
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