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An Analysis of the Cattle Feeding Spread in the U.S

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  • Qingfeng Wilson Liu

    (James Madison University, Harrisonburg, VA, USA)

  • Hui He Sono

    (James Madison University, Harrisonburg, VA, USA)

Abstract

This study examines the relations among feeder cattle, corn, and live cattle futures listed on the Chicago Mercantile Exchange (CME), the components of the cattle feeding spread. We find that the three series are cointegrated, and that the cointegration relationship is characterized by strong seasonality and uptrend. Further, there is evidence of one-way information flow and volatility spillover from the feeder cattle and corn markets to the live cattle market, and bidirectional volatility spillover between the feeder cattle and corn markets. Our in-sample trading simulations that utilize this cointegration relationship are able to generate profits that are both statistically and economically significant, suggesting inefficiency exists in these commodity futures markets. This is, to a certain extent, corroborated by the results from our out-of-sample trading simulations that employ similar trading rules.

Suggested Citation

  • Qingfeng Wilson Liu & Hui He Sono, 2025. "An Analysis of the Cattle Feeding Spread in the U.S," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 28(03), pages 1-28, September.
    • Handle: RePEc:wsi:rpbfmp:v:28:y:2025:i:03:n:s0219091525500195
    DOI: 10.1142/S0219091525500195
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