The Effects of U.S. Meat Packing and Livestock Production Technologies on Marketing Margins and Prices

Abstract

Real livestock prices and farm-wholesale marketing margins have steadily declined over the past 20 years. Studies examining the causes of these declines have generally failed to account directly for technological change in livestock production and red meat slaughtering. We estimate reduced-form models for beef and pork farm-wholesale marketing margins and cattle and hog prices that include specific measures of technological change. Empirical results indicate cost savings generated by improved meat packing technologies have reduced real margins and positively influenced real cattle and hog prices. However, technological change embodied in cattle production weights has led to substantial declines in real slaughter cattle prices. Nonetheless, the net effect of improved meat packing technology has been to increase cattle price by $1.75/cwt and reduce the farm-wholesale beef marketing margin by 22.8 cents/lb.

Keywords

• livestock prices
• marketing margins
• technological change