Market Power in Poultry Production Contracting? Evidence from a Farm Survey
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The exercise of market power by broiler processing firms (integrators) is plausible because
local markets for growers are concentrated and because growers face hold-up risks arising
from substantial investments in specific assets set against limited integrator purchase commitments.
This article explores the links between local integrator concentration and grower
compensation under production contracts using data from the 2006 broiler version of the
USDA’s Agricultural Resource Management Survey. Results of this study, which account for
characteristics of the operation and specific features of the production contract, suggest that
greater integrator concentration results in a small but economically meaningful reduction in
grower compensation.