Inter-Firm Differences in Fed Cattle Prices in the Southern Plains

Pooled cross-section time-series data were used to assess inter-firm differences in fed cattle prices paid by southern plains meatpackers during June 1989. Significant price differences were found among packers, even after accounting for numerous factors affecting fed cattle value. Some buyers paid higher prices and some lower prices than did one of the three largest packers. As a group, the Big Three firms paid lower prices than did smaller firms, both in the southern plains as a whole and in three of its subregions. Key words: buyer competition, fed cattle, meatpacking, oligopsony, price analysis. Mergers involving several large meatpackers in 1987 significantly increased the size of the sec-ond and third largest meatpacking firms, creat-ing what have been called the "Big Three" packers (lBP, Excel, and ConAgra). The merg-ers continued trends toward fewer and larger firms and increased concentration in meatpacking (Ward 1988). Four-firm concentration ratios for steer and heifer slaughter nearly doubled in the 1980s, beginning the decade at 35.6 and reach-ing 70.4 in 1989 (Packers and Stockyards Administration). Research encompassing data periods prior to 1987 suggest increasing con-centration and declining buyer numbers ad-versely affect fed cattle prices (Menkhaus, St.Clair, and Ahmaddaud; Ward 1981; Marion, Geithman, and Quail). The present research examines fed cattle price differences among buyers and buyer groups fol-lowing the mergers of 1987. Fed cattle pricing models were estimated with specific focus on transaction price differences among individual meatpacker buyers and between the Big Three and rival firms