Journal of Agribusiness 21,2(Fall 2003):183S196 © 2003 Agricultural Economics Association of Georgia Estimated Impact of Non-Price Coordination of Fed Cattle Purchases on Meat Packer Processing Costs

Stochastic simulation of daily slaughter level was used in conjunction with an estimated packing plant cost curve to assess potential reductions in processing costs due to improved vertical coordination between feedlots and packing plants. Results indicate that processing cost reductions of $1 to $5 per head may be possible. Savings result from ensuring a more stable processing volume that is near the plant’s cost-minimizing level of production. Key Words: cattle, cost curve, meat packing, vertical coordination An extensive body of literature discusses the nature, causes, and conceptual benefits of vertical coordination via non-price methods. However, since economists rarely have the opportunity to measure performance criteria for various forms of vertically coordinated structures, empirical estimates of the value of coordination are notice-ably absent in the literature. Similarly, there are no estimates of the level of gains or losses experienced by the various participants in the supply chain. As Den Ouden et al. (1996) note: In spite of the extensive descriptive literature on the potential benefits and cost