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Beef safety shocks and dynamics of vertical price adjustment: The case of BSE discovery in the U.S. beef sector

  • Sayed H. Saghaian

    (Department of Agricultural Economics, University of Kentucky, Lexington, KY 40546-0276)

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    This article addresses the dynamic impact of the 2003 Bovine Spongiform Encephalopathy discovery on the U.S. beef sector. Time series analysis and historical decomposition with weekly feedlot, wholesale, and retail beef price series is used to address the dynamics of price adjustment and causality along the U.S. beef marketing channel. The results show price transmission is bidirectional, determined through interaction between the different stages, and price adjustment is asymmetric with respect to both speed and magnitude. The results reveal a differential impact of the exogenous shock on producers and retailers, which leads to widening of price margins and points to imperfect price transmission, specifically at the retail level, with consequences for the efficiency and equity of the marketing channel. [EconLit citations: Q11, Q13]. © 2007 Wiley Periodicals, Inc. Agribusiness 23: 333-348, 2007.

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    File URL: http://hdl.handle.net/10.1002/agr.20127
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    Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

    Volume (Year): 23 (2007)
    Issue (Month): 3 ()
    Pages: 333-348

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    Handle: RePEc:wly:agribz:v:23:y:2007:i:3:p:333-348
    Contact details of provider: Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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    1. Adusei Jumah, 2004. "The long run, market power and retail pricing," Empirical Economics, Springer, vol. 29(3), pages 605-620, 09.
    2. Ben Kaabia, Monia & Gil, Jose Maria & Boshnjaku, L., 2002. "Price Transmission Asymmetries in the Spanish Lamb Sector," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24908, European Association of Agricultural Economists.
    3. Charles Hyde & Jeffrey Perloff, 1998. "Multimarket market power estimation: the Australian retail meat sector," Applied Economics, Taylor & Francis Journals, vol. 30(9), pages 1169-1176.
    4. Nicholas E. Piggott & Thomas L. Marsh, 2004. "Does Food Safety Information Impact U.S. Meat Demand?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 154-174.
    5. Matthews, Kenneth H. Jr & Hahn, William F. & Nelson, Kenneth E. & Duewer, Lawrence A. & Gustafson, Ronald A., 1999. "U.S. Beef Industry: Cattle Cycles, Price Spreads, and Packer Concentration," Technical Bulletins 184374, United States Department of Agriculture, Economic Research Service.
    6. Martin B. Schmidt, 2000. "The Dynamic Behavior of Wages and Prices: Cointegration Tests within a Large Macroeconomic System," Southern Economic Journal, Southern Economic Association, vol. 67(1), pages 123-138, July.
    7. S. McCorriston & C. W. Morgan & A. J. Rayner, 1998. "Processing Technology, Market Power and Price Transmission," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(2), pages 185-201.
    8. Richard Tiffin & P. J. Dawson, 2000. "Structural breaks, cointegration and the farm-retail price spread for lamb," Applied Economics, Taylor & Francis Journals, vol. 32(10), pages 1281-1286.
    9. Bordo, Michael David, 1980. "The Effects of Monetary Change on Relative Commodity Prices and the Role of Long-Term Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(6), pages 1088-1109, December.
    10. Babula, Ronald A. & Bessler, David A. & Payne, Warren S., 2004. "Dynamic Relationships Among U.S. Wheat-Related Markets: Applying Directed Acyclic Graphs to a Time Series Model," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(01), April.
    11. Arthur M. Okun, 1975. "Inflation: Its Mechanics and Welfare Costs," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(2), pages 351-402.
    12. Barry K. Goodwin & Matthew T. Holt, 1999. "Price Transmission and Asymmetric Adjustment in the U.S. Beef Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 630-637.
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