A conceptual framework for examining implications of excess slaughtering capacity in meatpacking is presented. Excess capacity stems from two sources: percentage plant utilization based on line speed and based on length of operating time per given period. Data from a mail survey of 310 meatpacking firms verified that significant size differences exist among slaughtering plants. Significant differences in percentage utilization were also found for some species. Results suggest larger fed cattle slaughtering firms could be paying higher prices for cattle purchased.
Croml noted that the number of livestock slaughtering plants in the US declined 45.7% between 1967 and 1986. During that period, a few large plants were built and several plants were operated more intensively (e. g., by switching from single-shift to double-shift operations and by adding a sixth operating day per week). Crom stated that no accurate estimates of industry slaughtering capacity are available, but excess capacity is assumed to exist. Excess capacity in fed cattle slaughtering is speculated to be a causal factor leading to structural. changes in meatpacking.
This article explores the competition and pricing impacts stemming from meatpacking capacity and utilization. Objectives are: (1) to conceptually examine potential impacts of meatpacking capacity and utilization on livestock prices; and (2) to present estimates of meatpacking capacity and utilization based on a survey of meatpacking firms.
CONCEPTUAL FRAMEWORK
Price discovery was defined by Thomsen and Foote2 as the process of individual buyers and sellers arriving at transaction prices for a given quantity and quality of
The author is a Professor