A new study from USDA says beef packers do not appear to be exercising market power over cattle prices, but the potential to do so exists.  Continued monitoring or market concentration and use of market power "would be helpful," the report says.

The research for the report "did not find cattle inventory numbers or net returns to cow-calf producers above cash costs to have fluctuated during the 1990s beyond what would have been expected at least 95% of the time," according to the report.
There was a shift in pricing system behavior during 1992-96, but the shift increased prices for live cattle, wholesale and retail beef prices higher than they would have been, "given their earlier patterns of reaction to supply and demand shocks."

Farm-wholesale price spreads have been unaffected, and the wholesale-retail spread has declined.  Recent shifts in the system "actually led to higher prices."

Despite findings such as increasing slaughter concentration is associated with higher farm prices, "packers do not appear to be exercising market power."  It also "is clear that with concentration measures of 80% or higher, the potential for exercising market power in the industry does exist," the report concludes.

"Beef producers have expressed concern over the low prices and low producers' share of the retail dollar.  Most of their attention has been directed at beef packers, even though the largest part of the spread between farm and retail occurs between the packer and the retailer."