Rigidity in Packer-Feedlot Relationships

Concentration in beef packing has risen dramatically in the past 25 years. We develop measures used to describe feedlot-packer relations: (1) a statistic based on the proportion of its sales a feedlot makes to a given packer, and (2) a measure of the switching behavior of feedlots. The measures are calculated using a confidential data set from the USDA Grain Inspection, Packers and Stockyards Administration. Relationships are found to be both exclusive and stable. Causes for this rigidity are then examined using regression analysis. Transaction costs are shown to help explain why this market differs from a perfectly competitive one.