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Looking for Cattle and Hog Cycles through a Bayesian Window

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  • Dorfman, Jeffrey H.
  • Park, Myung D.
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    Abstract

    The agricultural economics literature, both academic and trade, has discussed the assumed presence of cycles in livestock markets such as cattle and hogs for a very long time. Since Jarvis (1974), there has been considerable discussion over how these cycles impact optimal economic decision making. Subsequent studies such as Rucker, Burt, and LaFrance (1984), Hayes and Schmitz (1987), Foster and Burt (1992), Rosen, Murphy, and Scheinkman (1994), and Hamilton and Kastens (2000) have all investigated some aspect of how biological factors, economic events, or economic actions could be causes of and/or responses to cycles in hog and cattle inventories. There has also been debate, again both in the academic and trade literature, over the length of the cycle(s) present in hog and cattle stocks. To provide both academics and producers with accurate information on the number and periods of cycles that might be present in hog and cattle inventories, this paper provides a purely statistical view of the matter. Using over 140 years of annual data on cattle and hog inventory levels, we estimate Bayesian autoregressive, trend-stationary models on cattle inventories, hog inventories, and the growth rate of cattle inventories. We then use those models to find the posterior distributions of both the number of cycles present in each series and the period lengths of those cycles. We find multiple cycles present in all three series. Cattle inventory results show clear evidence in favor of 4.5, 6, and 11 year cycles with other cycles present but not as clearly identified. Hog inventory results identify five cycles with periods of approximately 4.5, 5.4, 6.8, 10 and 13 years. The data on the growth rate in cattle stocks has similar cycles to the series on the stock levels.

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    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49278.

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    Date of creation: 28 Apr 2009
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    Handle: RePEc:ags:aaea09:49278

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    Keywords: Bayesian econometrics; cattle cycles; hog cycles.; Agribusiness; Livestock Production/Industries; Production Economics;

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    1. Foster, Kenneth A & Burt, Oscar R, 1992. "A Dynamic Model of Investment in the U.S. Beef-Cattle Industry," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 419-26, October.
    2. Rosen, Sherwin & Murphy, Kevin M & Scheinkman, Jose A, 1994. "Cattle Cycles," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 468-92, June.
    3. Hayes, Dermot J. & Schmitz, Andrew, 1987. "Hog Cycles and Countercyclical Production Response," Staff General Research Papers 597, Iowa State University, Department of Economics.
    4. Stephen F. Hamilton & Terry L. Kastens, 2000. "Does Market Timing Contribute to the Cattle Cycle?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(1), pages 82-96.
    5. Randal R. Rucker & Oscar R. Burt & Jeffrey T. LaFrance, 1984. "An Econometric Model of Cattle Inventories," Development Research Unit Working Paper Series archive-25, Monash University, Department of Economics.
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