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Risk Response in the Beef Marketing Channel: A Multivariate Generalized ARCH-M Approach

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  • Matthew T. Holt

Abstract

A model of the farm-retail price spread for beef is specified under rational expectations, in which systematic risk response on the part of marketing intermediaries is allowed. The three-equation structural model contains potentially time-varying risk terms in margin and supply equations, which I approximate and estimate using a multivariate GARCH-in-Mean approach. The estimated model is used to infer relative risk premia in beef margins, and to simulate short-run equilibrium risk effects. Results indicate that price risk has, at times, had substantial impacts on farm and retail beef prices and production.

Suggested Citation

  • Matthew T. Holt, 1993. "Risk Response in the Beef Marketing Channel: A Multivariate Generalized ARCH-M Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(3), pages 559-571.
    • Handle: RePEc:oup:ajagec:v:75:y:1993:i:3:p:559-571.
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    Cited by:

    1. Lee, Jung-Hee & Brorsen, B. Wade, 1994. "Effect Of Risk Aversion On Feeder Cattle Prices," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 26(2), pages 1-7, December.
    2. Kenneth Njoroge & Amalia Yiannaka & Konstantinos Giannakas & Azzeddine M. Azzam, 2007. "Market and Welfare Effects of the U.S. Livestock Mandatory Reporting Act," Southern Economic Journal, John Wiley & Sons, vol. 74(1), pages 290-311, July.
    3. Marsh, John M., 2001. "U.S. Feeder Cattle Prices: Effects Of Finance And Risk, Cow-Calf And Feedlot Technologies, And Mexican Feeder Imports," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(2), pages 1-15, December.
    4. Haigh, Michael S. & Bryant, Henry L., 2001. "The effect of barge and ocean freight price volatility in international grain markets," Agricultural Economics, Blackwell, vol. 25(1), pages 41-58, June.
    5. Julie SUBERVIE, 2006. "The impact of world price instability on agricultural supply according to several macroeconomic factors," Working Papers 200604, CERDI.
    6. Haigh, Michael S. & Bryant, Henry L., 2000. "Price And Price Risk Dynamics In Barge And Ocean Freight Markets And The Effects On Commodity Trading," 2000 Conference, April 17-18 2000, Chicago, Illinois 18934, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    7. Bahareh Mosadegh Sedghy & Rémy Lambert & Lota Dabio Tamini, 2016. "Supply response of corn farmers in Quebec: Analyzing the impact of prices volatility?," Cahiers de recherche CREATE 2016-1, CREATE.
    8. Kim, Jong-Jin & Zheng, Xiaoyong, 2015. "Effects of Alternative Marketing Arrangements on the Spot Market Price Distribution in the U.S. Hog Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(2), pages 1-24, May.
    9. J. Frank & P. Garcia, 2009. "Time-varying risk premium: further evidence in agricultural futures markets," Applied Economics, Taylor & Francis Journals, vol. 41(6), pages 715-725.
    10. Barrett, Christopher B., 1997. "Liberalization and food price distributions: ARCH-M evidence from Madagascar," Food Policy, Elsevier, vol. 22(2), pages 155-173, April.
    11. Mujawamariya, Gaudiose & Burger, Kees & D'Haese, Marijke F.C., 2012. "Behaviour and performance of traders in the gum arabic supply chain in Senegal: Investigating oligopsonistic myths," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126236, International Association of Agricultural Economists.
    12. Mosadegh Sedghy, Bahareh & Tamini, Lota D. & Lambert, Remy, 2021. "Implications of the state assistance program in the province of Quebec: the case of lamb production," MPRA Paper 112162, University Library of Munich, Germany.
    13. Michael S. Haigh & Henry L. Bryant, 2000. "The effect of barge and ocean freight price volatility in international grain markets," Agricultural Economics, International Association of Agricultural Economists, vol. 25(1), pages 41-58, June.
    14. Rezitis, Anthony N. & Stavropoulos, Konstantinos S., 2010. "Modeling beef supply response and price volatility under CAP reforms: The case of Greece," Food Policy, Elsevier, vol. 35(2), pages 163-174, April.
    15. Maurice J. Roche & Kieran McQuinn, 2003. "Grain price volatility in a small open economy," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 30(1), pages 77-98, March.
    16. Dahl, Christian M. & Iglesias, Emma M., 2009. "Volatility spill-overs in commodity spot prices: New empirical results," Economic Modelling, Elsevier, vol. 26(3), pages 601-607, May.
    17. Maples, Joshua G. & Harri, Ardian & Riley, John Michael & Tack, Jesse B., 2013. "Marketing Margins and Input Price Uncertainty," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150604, Agricultural and Applied Economics Association.
    18. Alan Woodland & Kishti Sen, 2010. "The volatility of Australian traded goods' prices," Applied Economics, Taylor & Francis Journals, vol. 42(30), pages 3849-3869.
    19. Mosadegh Sedghy, Bahareh & Tamini, Lota Dabio & Lambert, Remy, 2018. "Effects of Price Insurance Programs on Supply Response: A Case Study of Corn Farmers in Quebec," MPRA Paper 93816, University Library of Munich, Germany, revised 30 Nov 2018.
    20. Richards, Timothy J. & Patterson, Paul M. & van Ispelen, Pieter, 1998. "Modeling Fresh Tomato Marketing Margins: Econometrics And Neural Networks," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 27(2), pages 1-14, October.
    21. Marsh, John M., 2000. "U.S. Feeder Cattle Prices: Effects of Finance and Risk, Cow-Calf and Feedlot Technology, and Mexican and Canadian Feeder Imports," Research Discussion Papers 256824, Montana State University, Department of Agricultural Economics and Economics, Trade Research Center.

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