Captive supplies and cash market prices for fed cattle: The role of delivery timing incentives
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 empirical regularity in the cattle procurement activities of four large packing plants in Texas in the mid-1990s. [EconLit citations: Q130, L140.] © 2004 Wiley Periodicals, Inc. Agribusiness 20: 347-362, 2004.
Volume (Year): 20 (2004)
Issue (Month): 3 ()
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- Severin Borenstein & Andrea Shepard, 1993.
"Dynamic Pricing in Retail Gasoline Markets,"
NBER Working Papers
4489, National Bureau of Economic Research, Inc.
- 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.
- 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.
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