Pass-through in United States beef cattle prices: a test of Ricardian rent theory
AbstractFeeder cattle are fattened to become fed live cattle 6 months later, and the feeder cattle stock is fixed in the short-run. Efficiency in competitive markets suggests feeder cattle prices should fully reflect feed prices and information on future fed cattle prices. Employing a long time series (1979Ã¢â¬â2004) of feeder cattle futures, live cattle futures, and local corn prices, we test whether complete pass-through occurs. For fed cattle futures prices, we find about 93% of complete pass-through to present feeder cattle prices. The corresponding negative effect of a corn price increase is about 87% of complete pass-through. In contrast with imperfectly competitive agricultural land rental markets, the results support the hypothesis of Ricardian rent extraction by the scarce asset owner in feeder cattle markets.
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Bibliographic InfoArticle provided by Springer in its journal Empirical Economics.
Volume (Year): 40 (2011)
Issue (Month): 2 (April)
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Other versions of this item:
- Zhao, Huan & Xiaodong, Du & Hennessy, David A., 2011. "Pass-Through in United States Beef Cattle Prices: A Test of Ricardian Rent Theory," Staff General Research Papers 32095, Iowa State University, Department of Economics.
- Zhao, Huan & Xiaodong, Du & Hennessy, David A., 2011. "Pass-Through in United States Beef Cattle Prices: A Test of Ricardian Rent Theory," Staff General Research Papers 36023, Iowa State University, Department of Economics.
- D4 - Microeconomics - - Market Structure and Pricing
- Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
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