Market Effects from Opening and Closing Meat Processing Facilities

Abstract

The purpose of this study was to determine the market impacts from the opening and closing of meat processing facilities. More specifically it was to determine the fed cattle market impacts when the ConAgra beefpacking plant in Garden City, Kansas, closed in December of 2000. Secondly was to determine the hog market impacts from the opening of the Maple Leaf Foods porkpacking plant in Brandon, Manitoba, in August of 1999. The markets were analyzed using price differences and partial adjustment models. Cattle producers in the High Plains were surveyed about their perceptions of the effects from the ConAgra plant closing. Hog producers in western Manitoba were surveyed about their perceived impacts from the Maple Leaf Foods plant opening. Survey data were analyzed using ordered logit models. In the ConAgra case, a price decrease was found. This level of change was inconsistent across all markets. In most states, the price impact only occurred for a few weeks. Producers thought the closing decreased fed cattle prices because of the lack of competition in the market. This was confirmed by the ordered logit models. The Maple Leaf plant opening caused a slight increase in prices. This also only lasted a few weeks. Hog producers thought that after the opening, Maple Leaf decreased prices. This is contrary to the data findings, but some of the possible Maple Leaf impacts occurred several years later. Considering the size of the plants, the market only required a small amount of time to adjust. Concentration and consolidation in the meatpacking industry did not cause a significant delay in the market adjustment to the plant events.