> Seems to me that the "prices of the supermarket ham and the breakfast
> muffin" make perfect sense. Is this not a textbook example (I note
> that you hail from a Department of Agricultural Economics) of the
> result of monopoly (do I have to say "oligopoly"?) in a market sector?
> There is no incentive to pass along cost reductions to the final
> consumer, since real competition does not exist.
>
> So Bill's saying that "the current price of the pig just doesn't make any
> sense" is a statement that the market price for hogs does not reflect nearly
> all the costs. I can find no flaw in that statement or in that logic.
If his point was due to "imperfect prices" I would probably agree
wholeheartedly. Which is why I said, "I get your point." My problem is only
with how that point was stated.
If we assume oligopoly, as you say, the incentive to pass on cost reductions to
consumers is the ability to steal your opponent's customers, thereby increasing
your sales and profits. That's why oligopolies are inherently unstable (see
OPEC) without some means of forcing them to exist, as each firm always wants to
undercut the competition. For this market, it might be argued very well that
USDA packing regulations serve this purpose. Again, I wouldn't argue against
that. My point was simply that Bill's argument could have been more clear.
I don't mean to defend Seaboard or any other hog factory. I was really
searching for clarification, without entering the perennial debate on how best
to "fix" incorrect prices. I'm in constant amazement at the existence of these
factories, but then I don't eat pork.
Mark
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J. Mark Leonard Department of Agricultural Economics
Senior Research Specialist Oklahoma State University
(405)744-9988 522 Agricultural Hall
leonajm@okstate.edu Stillwater, OK 74078-6033