ABSTRACT
This chapter provides an overview of the food and beverage manufacturing industry, emphasizing differences in value added and policy-relevant qualities across several sectors. It introduces the economics of imperfect competition, showing how food manufacturers may exercise market power over farmers, or buyers, or both. The chapter describes the legal tools for protecting competitive markets, using the history of meatpacking, contracting in pork and poultry, concentration in breakfast cereals and patented inputs such as seeds as examples. A market's price and quantity depend on the degree of competition. Competition, in turn, depends partly on the number of buyers and sellers. Given the many potential shortcomings of imperfect competition, the US government has long sought to use public policy to protect and enhance competition in food and agricultural markets. Vertical coordination encompasses various forms of organized exchange between different levels of the food marketing system.
