Local Monopsony Power in the Market for Broilers - Evidence from a Farm Survey Report as inadecuate




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The exercise of monopsony power by broiler processing firms is plausible because production occurs within localized complexes, which limits the number of integrators with whom growers can contract. In addition, growers face distinct hold-up risks as broiler production requires a substantial investment in specific assets and most production contracts do not involve long-term purchasing commitments by integrators. This paper provides an initial exploration of the links between the local concentration of broiler integrators and grower compensation under production contracts using data from the 2006 broiler version of USDA’s Agricultural Resource Management Survey. Results of this preliminary study, which accounts for characteristics of the operation and specific features of the production contract, suggest a small but economically meaningful effect of concentration on grower concentration. Limitations of the current analysis and future possible model extensions are discussed.

Keywords: poultry ; broilers ; market power ; monopsony ; production contracts

Subject(s): Livestock Production/Industries

Marketing

Issue Date: 2008

Publication Type: Conference Paper/ Presentation

PURL Identifier: http://purl.umn.edu/6073

Total Pages: 24

Series Statement: Selected Paper

Record appears in: American Agricultural Economics Association (AAEA) > 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida





Author: Key, Nigel D. ; MacDonald, James M.

Source: http://ageconsearch.umn.edu/record/6073?ln=en



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