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, 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, Iowa State University, Department of Economics 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.:
- 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, Agricultural and Applied Economics Association, vol. 83(4), pages 826-839.
- repec:nbr:nberwo:12547 is not listed on IDEAS
- Jose Manuel Campa & Linda S. Goldberg, 2008.
"Pass-Through of Exchange Rates to Consumption Prices: What Has Changed and Why?,"
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, Federal Reserve Bank of New York 261, Federal Reserve Bank of New York.
- Campa, Jose M. & Goldberg, Linda S., 2006. "Pass through of exchange rates to consumption prices: What has changed and why?," IESE Research Papers, IESE Business School D/653, IESE Business School.
- 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, 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, American Economic Association, vol. 91(4), pages 1072-1083, September.
- Ay, Jean-Sauveur & Latruffe, Laure, 2013.
"The Empirical Content of the Present Value Model: A survey of the instrumental uses of farmland prices,"
Working Papers, Factor Markets, Centre for European Policy Studies
157112, Factor Markets, Centre for European Policy Studies.
- 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, Centre for European Policy Studies 165, Centre for European Policy Studies.
- Jean-Sauveur Ay & Laure Latruffe, 2013. "The empirical content of the present value model: a survey of the instrumental uses of farmland prices," Working Papers 209441, Institut National de la Recherche Agronomique, France.
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