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The Magnitude and Timing of Retail Beef and Bread Price Response to Changes in Input Costs

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  • Roeger, Edward
  • Leibtag, Ephraim S.

Abstract

In this study we develop a model for pass-through behavior for two retail food items with different levels of processing, beef and bread, using 36 years of monthly Bureau of Labor Statistics price indices data (1972-2008). Through the use of a two-stage error correction model that allows for the possibilities of asymmetric and threshold type response behavior, we analyze both the farm to wholesale and wholesale to retail price relationship considering underlying cointegrating relationships and allowing for the presence of structural breaks in these long term equations. Our results indicate that broad differences in price behavior exist not only between food categories but also across production level prices. While farm to wholesale relationships generally appear to be symmetric, retail prices are shown to have a somewhat more complicated response behavior, and for both food products the pass-through at this stage is weaker than that of the farm to wholesale response.

Suggested Citation

  • Roeger, Edward & Leibtag, Ephraim S., 2010. "The Magnitude and Timing of Retail Beef and Bread Price Response to Changes in Input Costs," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61041, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea10:61041
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    File URL: http://purl.umn.edu/61041
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    References listed on IDEAS

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    1. Vocke, Gary & Buzby, Jean C. & Wells, Hodan Farah, 2008. "Consumer Preferences Change Wheat Flour Use," Amber Waves, United States Department of Agriculture, Economic Research Service, September.
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    5. Giliola Frey & Matteo Manera, 2007. "Econometric Models Of Asymmetric Price Transmission," Journal of Economic Surveys, Wiley Blackwell, vol. 21(2), pages 349-415, April.
    6. Potter, Simon M, 1995. "A Nonlinear Approach to US GNP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 109-125, April-Jun.
    7. 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.
    8. Peters, May & Langley, Suchada V. & Westcott, Paul C., 2009. "Agricultural Commodity Price Spikes in the 1970s and 1990s: Valuable Lessons for Today," Amber Waves, United States Department of Agriculture, Economic Research Service, March.
    9. Trostle, Ronald, 2008. "Factors Contributing to Recent Increases in Food Commodity Prices (PowerPoint)," Seminars 43902, USDA Economists Group.
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    Cited by:

    1. Roeger, Edward & Leibtag, Ephraim S., 2011. "How Retail Beef and Bread Prices Respond to Changes in Ingredient and Input and Costs," Economic Research Report 102757, United States Department of Agriculture, Economic Research Service.

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