Doctoral Dissertations

Date of Award

6-1970

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Major

Agricultural Economics

Major Professor

M. B. Badenhop

Committee Members

Irving Dubov, Charles Sappington, Hans E. Jenses

Abstract

The objectives of this study were: (l) to determine the number, size, and location of livestock auction markets in Tennessee that would minimize the combined costs of assembling and selling the annual live-stock marketings of producers in Tennessee, and (2) to determine the area to be served by each of these auctions. It was postulated that there are too many livestock auction markets in the state to develop an efficient, low cost livestock market system. Estimates of the annual marketings of cattle, calves, hogs, and sheep were made for all counties in the state using data from the 1959 and 1964 Censuses of Agriculture and the 1968 Crop Reporting Board estimates. Costs of assembling the estimated volume of livestock were computed for all possible combinations of the potential market loca-tions in the West, Middle and East Tennessee areas. From these possible combinations, that combination of potential market locations which min-imized annual assembly costs for any given number of markets, and thus for various numbers of markets, was selected. Annual costs of operating livestock auction markets were developed in a previous study (Cibb, 1959) and then were adjusted to reflect present marketing costs. These annual costs were expressed in terms of the number of markets. Determination of the optimum number, size, and location of auction markets was accomplished by combining the minimized annual assembly and annual auction market costs with respect to the number of markets. Specification of the optimum number of markets was achieved by select-ing the number of markets with the minimum combined cost. The optimum market locational pattern was obtained by identifying the market sites which minimized annual assembly costs in the solution for the optimum number of markets. Annual marketings of livestock transported to each market from all origins in that supply area were summed to determine the size of market required at each location. Under the assumption that all livestock be sold through auction agencies, total combined annual assembly and annual market costs were minimized for the state with the selection of 18 markets. The optimum number was determined to be six markets for West Tennessee located at Dresden, Memphis, Lexington, Selmer, Ripley, and Troy; seven markets for Middle Tennessee located at Cookeville, Columbia, Manchester, Lebanon, Clarksville, Lawrenceburg, and Shelbyville; and five markets for East Tennessee located at Knoxville, Athens, Johnson City, Pikeville, and Morristown. The volume of livestock marketed at these opti-mal locations ranged from a low of 60,376 head of livestock at Memphis to a high of 282,481 head at Cookeville. When assembly costs were increased by 10 percent from the orig-inal estimate, the optimum number of markets for the state increased from 18 to 19 with the additional market located at Trenton. There was no change in the optimum solution when assembly costs were reduced by 10 percent. Under the assumption that the total volume of livestock sold through auction agencies be composed of annual cattle marketings in-creased by 25 percent, annual hog marketings decreased by 50 percent, and with no change in annual marketings of calves and sheep, total combined annual assembly and annual market costs were minimized for the state with 17 markets. This was one market less than the optimum number derived under the assumed condition that all the annual live-stock marketings be sold through auctions. West Tennessee was the only area of the state where the number and location of markets were affected by the changes in livestock marketings. In this case, the optimum number was determined to be five markets located at Memphis, Dresden, Ripley, Troy, and Jackson. The Lexington and Selmer locations that were originally included in the optimum combination of markets were re-placed by a single market located at Jackson. The volume of livestock marketed at these optimal locations ranged from a low of 56,525 head of livestock at Memphis to a high of 206,980 head at Dresden. When assembly costs were increased by 10 percent from the orig-inal estimate, the optimum number of markets for the state increased from 17 to 18 with the additional market located at Nashville. When assembly costs were decreased by 10 percent, the optimum number of markets for the state decreased from 17 to 16, eliminating the market location at Troy. Results of this study support the hypothesis that Tennessee has too many markets to develop an efficient, low cost livestock auction market system. The optimal solutions under the various postulated con-ditions indicating a least cost structure of from 16 to 19 strategically located auction markets emphasize the need to give serious consideration to reducing the number of auction markets operating in Tennessee. The tendency to establish new marketing facilities in local communities, further dividing the available supply of livestock, poses a serious problem for the livestock industry. Continuation of this trend will insure a high-cost, inefficient livestock market system in Tennessee.

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