1.Discuss three reasons why has the agricultural industry consolidated.
-In the 1970's the top 5 beef packers controlled only about 25% of the market and thousands of slaughterhouses produced the majority of the meet sold. Today, there are only 13 left, and the top 4 beef packers control more than 80% of the market. Indeed, a modern supermarket nowadays sells on average 47,000 products, mainly produced by a handful of food-processing enterprises.
1- Firms increase their market share either by expanding their sales faster than the industry average or by acquiring or merging with other firms in the industry. Firms can expand their sales faster than others in the industry by offering better products or services, improving their marketing ability, or offering lower prices through economies of scale. The leading input firms in 2010 had faster sales growth than the industry average, but a significant amount of that growth came from acquisitions of other firms. For instance, large companies like Pepsi, Kraft and Kellogg don't grow organically, but rather by the acquisition of other firms in order to increase their sales growth compared to the industry average.
2- Moreover, modern agriculture uses very few number of crops, very few species and very few companies. This type of modern agriculture is dependent on large amounts of petroleum and 75 gallons of oil are needed to bring a cow to slaughter. In order to decrease these considerable expenses, many small companies merge into much larger ones and subsequently take advantage of a much more efficient supply chain process.
3- Furthermore, the increase in R&D researches performed by global agricultural industries has coincided with significant changes to the structure of these industries. The largest firms have incorporated smaller companies to their portfolio to increase their market shares, and account for most of the investment in, and ownership of new innovations in these industries. It seems that implications of the market consolidation in the U.S. agricultural industry are limitless and allow companies to acquire relevant technological capacities and serve larger markets to share the large fixed costs associated with meeting regulatory approval for new biotechnology innovations.
2. Name 3 government policies/activities that influence the agricultural industry. For each policy/activity, discuss the ways they increase the power of suppliers and/or buyers. — Be sure to make clear references to what is the industry and who is the buyer or supplier in each instance.
1- Food labeling regulations stipulate what information is required on labels as well as what information is permitted and not permitted on labels. Similarly, adverttising regulations prohibit advertising that is untruthful or misleading. Nutrition, nonhealth information and safe handling labels are all controlled to varying degrees by regulations. The average consumer is technically not very powerful and does not know what he or she is really buying. The policies mentioned above allow the consumer to increase his power, make more educated food choices and demand good wholesome food.
2- Moreover, government interventions in the agricultural economy influence the quantities produced and price of food, and a number of different instruments are used to incentivize farmers to grow crops and buffer them through difficult economic or weather cycles, including price supports, supply controls, deficiency payments, direct payments, insurance, and demand expansion. Farmers growing commodity crops, such as corn are the largest beneficiaries of government support. This is a perfect example of how a governmental policy can…