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Issues in the analysis of buyer power in agricultural markets

George A. Rozanski and T. Scott Thompson
February 11, 2011
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The issue of buyer power in agricultural markets was a focus of the Workshops on Agriculture and Antitrust Enforcement Issues in Our 21st Century Economy (“Workshops”) held jointly by the Department of Justice (DOJ) and the Department of Agriculture (USDA) in 2010. Empirical and anecdotal evidence related to the question of buyer power in several agricultural sectors was discussed during the Workshops. This paper describes the appropriate analytical framework for analyzing competition policy issues related to buyer power, including both monopsony and bargaining power and it identifies some of the specific facts and issues relevant to the application of this framework to important agricultural sectors, including poultry, livestock, dairy, and grain. This paper also presents some data on the farm-retail spread, and discusses issues in interpreting these data as evidence of the exercise of buyer power.