The Long-term Effects of Meat Recalls on Futures Markets

Over the past twenty years, there has been an increasing trend in the number of recalls. Despite increased safety control standards, foodborne disease outbreaks continue to impact the food supply. A common source of foodborne illness and fatal infection is beef from diseases such as E. coli 0157:H7, Listeria Monocytogenes, and Salmonella. Certain companies have even been bankrupted, unable to overcome the social costs and economic losses associated with recalls. We examine beef recalls over a twenty year period through an accumulated two-year index to see if there is a prolonged effect of recalls on current weekly cattle prices. We find that recalls act together, adversely impacting prices and decreasing farm-level revenue. The revenue drop is economically small; therefore, it is uncertain if beef recalls financially incentivize cattle producers to invest in food safety safeguards.