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Relationships among Prices across Alternative Marketing Arrangements for Fed Cattle and Hogs

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  • Lee, Yoonsuk
  • Ward, Clement E.
  • Brorsen, B. Wade

Abstract

Reduced reliance on cash market prices for fed cattle and hogs raise questions about the role of cash prices in price discovery. We use seven years of weekly data from mandatory price reports to determine whether or not cash market prices are cointegrated with other procurement prices and then test for causality among the price series. Cash prices were cointegrated with all but one procurement price series. Cash market prices Granger cause all other procurement prices. Bidirectional causality was found in some but not all cases. Thus, cash market prices remain of central importance in price discovery for fed cattle and hogs.

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Bibliographic Info

Paper provided by Southern Agricultural Economics Association in its series 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida with number 56282.

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Date of creation: 2010
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Handle: RePEc:ags:saea10:56282

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Related research

Keywords: cattle; cointegration; causality; hogs; Johansen; marketing; prices; Stock-Watson; vector error correction; Livestock Production/Industries; Marketing; Q13(of Q18);

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References

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  1. Schroeter, John R. & Azzam, Azzeddine M., 2003. "Captive Supplies and the Spot Market Price of Fed Cattle: The Plant-Level Relationship," Staff General Research Papers 10082, Iowa State University, Department of Economics.
  2. Hunnicutt, Lynn & Bailey, DeeVon & Crook, Michelle, 2004. "Rigidity in Packer-Feedlot Relationships," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(03), December.
  3. Schroeter, John R. & Azzam, Azzeddine M., 2004. "Captive Supplies and Cash Market Prices for Fed Cattle: The Role of Delivery Timing Incentives," Staff General Research Papers 11159, Iowa State University, Department of Economics.
  4. Grunewald, Sarah & Schroeder, Ted C. & Ward, Clement E., 2002. "Cattle Feeder Perceptions Of Livestock Mandatory Price Reporting," 2002 Conference, April 22-23, 2002, St. Louis, Missouri 19056, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  5. 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.
  6. Xiaoyong Zheng & Tomislav Vukina, 2009. "Do Alternative Marketing Arrangements Increase Pork Packers' Market Power?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 250-263.
  7. Bailey, DeeVon & Brorsen, B. Wade, 1989. "Price Asymmetry In Spatial Fed Cattle Markets," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(02), December.
  8. Muth, Mary K. & Liu, Yanyan & Koontz, Stephen R. & Lawrence, John D., 2008. "Differences in Prices and Price Risk Across Alternative Marketing Arrangements Used in the Fed Cattle Industry," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 33(01), April.
  9. John M. Crespi & Richard J. Sexton, 2004. "Bidding for Cattle in the Texas Panhandle," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 660-674.
  10. Tian Xia & Richard J. Sexton, 2004. "The Competitive Implications of Top-of-the-Market and Related Contract-Pricing Clauses," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 124-138.
  11. repec:jaa:jagape:v:36:y:2004:i:3:p:627-638 is not listed on IDEAS
  12. John Crespi & Richard Sexton, 2005. "A Multinomial Logit Framework to Estimate Bid Shading in Procurement Auctions: Application to Cattle Sales in the Texas Panhandle," Review of Industrial Organization, Springer, vol. 27(3), pages 253-278, November.
  13. 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.
  14. Milton S. Boyd & B. Wade Brorsen, 1985. "Dynamic Relationship of Weekly Prices In the United States Beef and Pork Marketing Channels," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 33(3), pages 331-342, November.
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Cited by:
  1. Franken, Jason R.V. & Parcell, Joseph L. & Tonsor, Glynn T., 2011. "Impact of Mandatory Price Reporting on Hog Market Integration," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 43(02), May.

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