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Captive supplies and the spot market price of fed cattle: The plant-level relationship

  • John R. Schroeter

    (Department of Economics, Iowa State University, 260 Heady Hall, Ames, Iowa 50011-1070. E-mail: johns@iastate.edu)

  • Azzeddine Azzam

    (Department of Agricultural Economics, University of Nebraska-Lincoln, Lincoln, Nebraska. E-mail: aazzam@unlnotes.unl.edu)

Numerous articles in the agricultural economics literature investigate the empirical relationship between the spot market price of fed cattle and the volume of packers' precommitted, or “captive,” supplies of cattle. In this article, we use an extensive data set on the cattle procurement activities of four large packing plants in the Texas Panhandle from early 1995 through mid-1996 to examine this relationship at the plant-level. We find evidence to support the hypothesis that plants that anticipate near-term future deliveries of captive supply cattle that are high relative to their regional-market rivals' degrees of reliance on captive supplies tend to pay spot market prices that are below average. The effect, while statistically significant, is relatively small in magnitude, however. [EconLit citations: Q130, L200] © 2003 Wiley Periodicals, Inc. Agribusiness 19: 489-504, 2003.

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File URL: http://hdl.handle.net/10.1002/agr.10070
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Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 19 (2003)
Issue (Month): 4 ()
Pages: 489-504

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Handle: RePEc:wly:agribz:v:19:y:2003:i:4:p:489-504
Contact details of provider: Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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  1. Stephen R. Koontz, 1999. "Marketing Agreement Impacts in an Experimental Market for Fed Cattle," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(2), pages 347-358.
  2. Azzeddine Azzam, 1998. "Captive Supplies, Market Conduct, and the Open-Market Price," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 76-83.
  3. Schroeter, John R., 1988. "Estimating the Degree of Market Power in the Beef Packing Industry," Staff General Research Papers 11114, Iowa State University, Department of Economics.
  4. Love, H. Alan & Burton, Diana M., 1999. "A Strategic Rationale For Captive Supplies," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(01), July.
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