The use of non-cash methods of procuring fed cattle for slaughter has led to concern about the effect of these so-called "captive" supplies on cash market prices. Some empirical evidence suggests that there is a negative short-run relationship between the two: Cash market prices tend to be low in weeks in which captive supply shipments are high. We advance a different perspective on the relationship between captive deliveries and cash prices, arguing that the incentives that influence cattle delivery-scheduling decisions could lead to a negative relationship, not between the contemporaneous levels of captive shipments and price, but between the volume of captive deliveries, on the one hand, and an ex ante expectation of a week-to-week price change, on the other. Econometric testing provides some evidence of this empriical regularity in the cattle procurement activities of four large packing plants in Texas in the mid-90s.
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number
11159.
Length: Date of creation: 12 Dec 2003 Date of revision: Publication status: Published in Agribusiness: An International Journal, Summer 2004, Vol. 20, No. 3, pp. 347-62. Handle: RePEc:isu:genres:11159
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