Market Power in Canadian Beef Packing

摘要

Concentration levels in Canadian beef packing have increased dramatically over the last two decades, raising concerns about the possible use of market power in cattle procurement markets. This paper uses establishment-level data to test the hypothesis that Canadian beef packers use oligopsony power to pay lower prices for cattle than those which would prevail in a competitive market. A four-equation econometric system is estimated using generalized method of moments. No evidence is found that beef packers behaved in an anticompetitive manner on a national basis when procuring cattle during the period examined. This reinforces conclusions reached by previous studies using different data sets and estimation methods. However, given the lack of assurances that the U.S. slaughter market will remain open to Canadian cattle exporters, regulators must remain vigilant in monitoring the procurement practices of beef packers. There is also a need for greater levels of data disaggregation to allow fed and cull cattle procurement markets to be studied separately, perhaps even on a regional basis.