Beef Industry:

Packer Market Concentration and Cattle Prices

RCED-91-28: Published: Dec 6, 1990. Publicly Released: Dec 19, 1990.

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Pursuant to a congressional request, GAO reviewed the impact of recent mergers by beef packers, focusing on whether the resulting market dominance could allow larger packers to pay lower cattle prices.

GAO found that: (1) it was difficult to determine whether a high level of market dominance in the beef-packing industry could result in lower cattle prices, since relevant studies were either small, not applicable to the recent market, or had certain methodological limitations; (2) beef-packing industry analysts and experts did not believe that the recent increases in beef-packer concentrations lowered cattle prices during the last decade; (3) during the same period of the mergers, packers' investments in new, larger, and more efficient processing plants led to the development of excess capacity relative to available cattle supplies; (4) some industry analysts believed that the combined circumstances of excess capacity and decreased processing costs resulted in more vigorous competition and upward pressure on prices; and (5) some feedlot operators and cattle producers were concerned that the combined effect of increased beef-packer concentration and an increase in cattle supplies relative to processing capacity would exert greater influence over cattle prices in the future.

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