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Impact of Mandatory Price Reporting on Hog Market Integration

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  • Franken, Jason R.V.
  • Parcell, Joseph L.
  • Tonsor, Glynn T.

Abstract

This research examines whether mandatory price reporting (MPR) impacted price relationships among U.S. hog markets. Markets are cointegrated before and after MPR enactment, but not fully integrated in either period. Terminal markets adjust to shocks in the Iowa-Southern Minnesota market more quickly and Iowa-Southern Minnesota prices adjust to shocks in terminal markets more slowly following MPR enactment. Granger causality tests indicate a causal flow from terminal markets to Iowa-Southern Minnesota prices before MPR and a causal reversal after MPR enactment. These results likely reflect decreases in volume of negotiated sales, particularly in terminal markets, and greater reliance on mandatorily reported prices for market information.

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Bibliographic Info

Article provided by Southern Agricultural Economics Association in its journal Journal of Agricultural and Applied Economics.

Volume (Year): 43 (2011)
Issue (Month): 02 (May)
Pages:

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Handle: RePEc:ags:joaaec:104624

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Web page: http://www.saea.org/jaae/jaae.htm
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Related research

Keywords: cointegration; hog markets; mandatory price reporting; market integration; regime shift; Livestock Production/Industries; Marketing; Q13;

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References

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  1. Fausti, Scott W. & Qasmi, Bashir A. & Li, Jing & Diersen, Matthew A., 2010. "The Effect of the Livestock Mandatory Reporting Act on Market Transparency and Grid Price Dispersion," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 39(3), October.
  2. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
  3. Bailey, DeeVon & Brorsen, B. Wade, 1985. "Dynamics Of Regional Fed Cattle Prices," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 10(01), July.
  4. Azzeddine Azzam, 2003. "Market Transparency and Market Structure: The Livestock Mandatory Reporting Act of 1999," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 387-395.
  5. Colin A. Carter & Sandeep Mohapatra, 2008. "How Reliable Are Hog Futures as Forecasts?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 367-378.
  6. Christopher B. Barrett & Jau Rong Li, 2002. "Distinguishing between Equilibrium and Integration in Spatial Price Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 292-307.
  7. Barry K. Goodwin & Nicholas E. Piggott, 2001. "Spatial Market Integration in the Presence of Threshold Effects," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(2), pages 302-317.
  8. Pendell, Dustin L. & Schroeder, Ted C., 2006. "Impact of Mandatory Price Reporting on Fed Cattle Market Integration," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(03), December.
  9. Dabin Wang & William G. Tomek, 2007. "Commodity Prices and Unit Root Tests," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 873-889.
  10. McNew, Kevin & Fackler, Paul L., 1997. "Testing Market Equilibrium: Is Cointegration Informative?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(02), December.
  11. Lee, Yoonsuk & Ward, Clement E. & Brorsen, B. Wade, 2010. "Relationships among Prices across Alternative Marketing Arrangements for Fed Cattle and Hogs," 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida 56282, Southern Agricultural Economics Association.
  12. Frank, Julieta & Gomez, Miguel I. & Kunda, Eugene L. & Garcia, Philip, 2008. "Cash Settlement of Lean Hog Futures Contracts Reexamined," 2008 Conference, April 21-22, 2008, St. Louis, Missouri 37611, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  13. Ward, Clement E., 2008. "Preferential Cattle and Hog Pricing by Packers: Evidence from Mandatory Price Reports," 2008 Annual Meeting, June 23-24, 2008, Big Sky, Montana 37989, Western Agricultural Economics Association.
  14. Pei-Fen Chen & Chien-Chiang Lee, 2008. "Nonlinear adjustments in deviations from the law of one price for wholesale hog prices," Agricultural Economics, International Association of Agricultural Economists, vol. 39(1), pages 123-134, 07.
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Cited by:
  1. Franken, Jason R.V. & Cook, Michael L., 2013. "Impact of Board Structure and Process on Cooperative Performance," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149420, Agricultural and Applied Economics Association.
  2. Trujillo-Barrera, Andres & Mallory, Mindy L. & Garcia, Philip, 2012. "Volatility Spillovers in U.S. Crude Oil, Ethanol, and Corn Futures Markets," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(2), August.

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