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 (1979â€“2004) 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 InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 32095.
Date of creation: 15 Apr 2011
Date of revision:
Publication status: Published in Empirical Economics, April 2011,, pp. 497-508
Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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Cattle futures; Feeder cattle; Live cattle;
Other versions of this item:
- Huan Zhao & Xiaodong Du & David Hennessy, 2011. "Pass-through in United States beef cattle prices: a test of Ricardian rent theory," Empirical Economics, Springer, vol. 40(2), pages 497-508, April.
- 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
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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NBER Working Papers
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- Jose Manuel Campa & Linda S. Goldberg, 2008. "Pass-Through of Exchange Rates to Consumption Prices: What Has Changed and Why?," NBER Chapters, in: International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy (NBER-EASE Volume 17), pages 139-176 National Bureau of Economic Research, Inc.
- Jose Manuel Campa & Linda S. Goldberg, 2006. "Pass-through of exchange rates to consumption prices: what has changed and why," Staff Reports 261, Federal Reserve Bank of New York.
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- David Aadland & DeeVon Bailey, 2001. "Short-Run Supply Responses in the U.S. Beef-Cattle Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 826-839.
- Anderson, John D. & Trapp, James N., 2000. "The Dynamics Of Feeder Cattle Market Responses To Corn Price Change," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(03), December.
- Marcus Asplund & Richard Friberg, 2001. "The Law of One Price in Scandinavian Duty-Free Stores," American Economic Review, American Economic Association, vol. 91(4), pages 1072-1083, September.
- Latruffe , Laure & Ay, Jean-Sauveur, 2013. "The Empirical Content of the Present Value Model: A survey of the instrumental uses of farmland prices," Factor Markets Working Papers 165, Centre for European Policy Studies.
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