Agriculture Reference
In-Depth Information
It is the percentage of total industry sales revenues
that are accounted for by the four largest firms.
CR8 and CR20 are also used in some analyses).
The rate of increase in concentration for the
meat-packing industry, in which there is also the
highest degree of production contracting, signi-
ficantly outpaced agriculture as a whole. The
meat-packing CR4 increased from 29% to 57%
over this period. This trend continues in various
processing industries. For example, the CR4 of
US beef packers was estimated at 81% in 2002
and the CR4 for pork packers in 2002 was found
to be 64%. Table 12.2 presents CR4 data for a
cross-section of commodities over time.
Given that commodity producers have a
strong preference for autonomy (Key, 2005), the
observed increase in processor concentration
suggests that bargaining power on the part of
agricultural producers is decreasing, thus fuel-
ling the trend in production contracting. This
certainly appears to be the case in the hog indus-
try where producers who value autonomy less
than they fear the risks of being without a con-
tract eagerly adopt contracts (Davis and Gillespie,
2007). However, there are exceptions to this
argument. For example, the soybean processing
industry saw an increase in concentration from
1982 to 2002, yet only a small portion of total
soybean production is under any form of con-
tract, as indicated in Table 12.1. The broiler
industry has by far the largest share of production
under production contract, yet among livestock
commodities it has both the lowest CR4 and the
slowest growth in concentration over the com-
parable time.
Producer concentration is also on the rise
in US agriculture. According to USDA data, the
percentage of farms in the USA with annual
sales of US$500,000 or more has increased
from 2% in 1991 to 4.4% in 2001. More strik-
ingly, these farms' share of total agricultural
production increased over this period from 39%
to 57.4%. Examining individual commodities,
Rios and Gray (2005) determined that the share
of industry total sales from farms with annual
sales of US$500,000 or higher increased from
10.9% to 77% for hogs from 1982 to 2002.
Production contracting is relatively very high for
hog production, even though the rate of growth
in hog producer concentration significantly out-
paced the equivalent numbers for commodities
with low production contracting, such as wheat,
maize and soybeans. Just as increased processor
concentration implies increased buyer bargain-
ing power, increased producer concentration
would normally suggest increased seller bargain-
ing power. However, concentration of hog pro-
ducers may be an outcome caused by the trend
of processors offering contracts most often to
larger producers only. Thus, the hog industry
case indicates there are some commodity-specific
factors influencing the level of production
Table 12.2.
Commodity industr
y concentration (%).
Commodity
CR4 1987
CR4 1992
CR4 1997
CR4 2002
Broilers
29
34
56
54
Hogs
20
25
64
68
Cattle
39
50
84
86
Dairy
21
22
21
30
Soybeans
71
71
75
95
Maize
74
73
80
69
Wheat
44
56
62
49
Oats
27
33
64
70
Barley
19
23
46
87
Rice
41
51
69
57
Cotton
18
19
20
26
Sugarbeet
83
85
85
85
Groundnut
68
80
82
87
Tobacco
70
76
83
89
Notes: 'CR4' is the concentration ratio reported by the US Census Bureau for the major product
category for the year indicated. The source for the CR4 and for the data used in the usage index
calculations is the Census Bureau's (US Department of Commerce, 2006)
2002 Economic Census
.
