Today, the U.S. Departments of Justice and Agriculture convene their fourth public hearing on corporate concentration in U.S. agricultural markets, a process I described previously on this blog. Farmers and ranchers are expected to crowd Fort Collins, Colorado to air their long-standing grievances about the disproportionate power of multinational meat packers. To contribute to this unprecedented public policy process, research assistant Sarah E. Trist and I surveyed the evidence of buyer power in U.S. hog markets, which have undergone rapid structural transformation in the last 25 years.
We found that among the limited studies of the issue, several that had been widely interpreted to suggest that buyer power was not a problem in fact presented evidence of just the opposite. Two related points were particularly striking. First is the pattern of approving mergers on the basis of “efficiency gains” that offset market power losses to consumers, when some of those apparent gains can actually come from packers using their buyer power to force down producer prices. The second is the way that buyer power in food retail can intensify the exercise of buyer power by packers, with farmers at the bottom of the food chain losing out from this “compounded” market power.