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Causal Relationships in the Fed Cattle Market

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  • Spreen, Thomas H.
  • Shonkwiler, J. Scott

Abstract

The production process of transforming a 600–700 pound feeder steer into a slaughter animal typically requires four to six months. Conceptually, there should exist some relationship between the prices of feeder calves and slaughter cattle prices. In one view, since the feeder calf constitutes the costliest input in the production of the slaughter animal, the prices of fed cattle should be temporally connected to the cost of the feeder animals. This view suggests that feeder calf prices should lead slaughter prices by the length of the production process (Trierweiler and Hassler). In another view, the price of feeder calves is determined by the interaction of the supply of and derived demand for feeder cattle by feedlot operators. It is presumed that the derived demand for feeder cattle is related to feedlot operators' expectations of future fed cattle prices. If their expectations are strongly influenced by current fed cattle prices, then a relationship is suggested whereby slaughter and feeder prices vary concomitantly.

Suggested Citation

  • Spreen, Thomas H. & Shonkwiler, J. Scott, 1981. "Causal Relationships in the Fed Cattle Market," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 13(1), pages 149-153, July.
    • Handle: RePEc:cup:jagaec:v:13:y:1981:i:01:p:149-153_02
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    References listed on IDEAS

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    1. Feige, Edgar L & Pearce, Douglas K, 1979. "The Casual Causal Relationship between Money and Income: Some Caveats for Time Series Analysis," The Review of Economics and Statistics, MIT Press, vol. 61(4), pages 521-533, November.
    2. Enrique R. Arzac & Maurice Wilkinson, 1979. "A Quarterly Econometric Model of United States Livestock and Feed Grain Markets and Some of Its Policy Implications," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(2), pages 297-308.
    3. Miller, Steve, 1979. "Univariate Residual Cross Correlation Analysis: An Application To Beef Prices," 1979 Annual Meeting, July 29-August 1, Pullman, Washington 278301, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. John R. Franzmann & Rodney L. Walker, 1972. "Trend Models of Feeder, Slaughter, and Wholesale Beef Cattle Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 54(3), pages 507-512.
    5. Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-552, September.
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    1. Adams, Charles M. & Prochaska, Fred J. & Spreen, Thomas H., 1987. "Price Determination in the U.S. Shrimp Market," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 19(2), pages 103-111, December.
    2. Williams, Christine H. & Bewley, Ronald A., 1993. "Price Arbitrage Between Queensland Cattle Auctions," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 37(1), pages 1-23, April.
    3. Sarker, Rakhal, 1990. "Testing Causality in Economics: A Review," Department of Agricultural Economics and Business 258629, University of Guelph.
    4. Van Tassell, Larry W. & Bessler, David A., 1988. "Dynamic Price Adjustments Between Commercial And Purebred Cattle Markets," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 20(2), pages 1-8, December.
    5. Ziemer, Rod F. & Collins, Glenn S., 1984. "Granger Causality And U.S. Crop And Livestock Prices," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 16(1), pages 1-6, July.
    6. Williams, Christine H. & Bewley, Ronald A., 1990. "The Transmission of Price Information at Queensland Cattle Auctions," 1990 Conference (34th), February 13-15, 1990, Brisbane, Australia 145472, Australian Agricultural and Resource Economics Society.
    7. Grundmeier, Eric (Eric L.), 1989. "Formulation of a carcass cutout value: an alternative wholesale beef pricing method," ISU General Staff Papers 1989010108000017580, Iowa State University, Department of Economics.
    8. Carlos Arnade & Gary Vocke, 2016. "Seasonal Variation in the Price Discovery Process of International Wheat," Agribusiness, John Wiley & Sons, Ltd., vol. 32(1), pages 16-32, January.
    9. Liapis, Peter S., 1989. "Estimation and Evaluation of Economic Community Wheat Export Subsidies," Staff Reports 278253, United States Department of Agriculture, Economic Research Service.

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