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The Value of USDA Situation and Outlook Information in Hog and Cattle Markets

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  • Isengildina, Olga
  • Irwin, Scott H.
  • Good, Darrel L.

Abstract

The economic value of public situation and outlook information has long been a subject of debate. The purpose of this study is to investigate the economic value of USDA reports in hog and cattle markets. The investigation is based on event study analysis, with the "events" consisting of the release of six major USDA situation and outlook reports for hogs and cattle from 1985 through 2003. These include Cattle, Cattle on Feed, Cold Storage, Hogs and Pigs, Livestock, Dairy and Poultry Outlook (LDPO), and World Agricultural Supply and Demand Estimates (WASDE) reports. As a result of the process of modeling volatility of hog and cattle prices, a TARCH-in-mean model was specified that closely followed the distribution of these price movements. The effects of external information were evaluated within this model using dummy variables in the variance equation. The analysis revealed a statistically significant impact of all but Cattle and Cold Storage reports on live/lean hog returns and all but LDPO reports on live cattle returns. Hogs and Pigs reports had the highest impact on live/lean hog returns by increasing average conditional standard deviation by 118.6% following the release of these reports. Cattle and Hogs and Pigs reports had the highest impact on live cattle returns by increasing average conditional standard deviation in both cases 44.8%. These results suggest that the information contained in USDA situation and outlook reports provides economically valuable information to livestock market participants.

Suggested Citation

  • Isengildina, Olga & Irwin, Scott H. & Good, Darrel L., 2005. "The Value of USDA Situation and Outlook Information in Hog and Cattle Markets," 2005 Conference, April 18-19, 2005, St. Louis, Missouri 19050, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  • Handle: RePEc:ags:ncrfiv:19050
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    Cited by:

    1. Lehecka, Georg V., 2014. "The Value of USDA Crop Progress and Condition Information: Reactions of Corn and Soybean Futures Markets," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 39(1), April.
    2. Isengildina-Massa, Olga & Irwin, Scott H. & Good, Darrel L. & Gomez, Jennifer K., 2008. "The Impact of Situation and Outlook Information in Corn and Soybean Futures Markets: Evidence from WASDE Reports," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 40(01), pages 89-103, April.
    3. Karali, Berna, 2012. "Do USDA Announcements Affect Comovements Across Commodity Futures Returns?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(1), April.
    4. repec:ags:jrapmc:122315 is not listed on IDEAS
    5. Stephen P. Keef & Hui Zhu, 2009. "The Monday effect in U.S. cotton prices," Agribusiness, John Wiley & Sons, Ltd., vol. 25(3), pages 427-448.
    6. Karali, Berna & Ramirez, Octavio A., 2014. "Macro determinants of volatility and volatility spillover in energy markets," Energy Economics, Elsevier, vol. 46(C), pages 413-421.
    7. Dorfmann, Jeffrey & Karali, Berna, 2015. "A Nonparametric Search for Information Effects from USDA Reports," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(1), January.
    8. Berna Karali & Walter N. Thurman, 2009. "Announcement effects and the theory of storage: an empirical study of lumber futures," Agricultural Economics, International Association of Agricultural Economists, vol. 40(4), pages 421-436, July.
    9. Adjemian, Michael K. & Johansson, Robert & McKenzie, Andrew & Thomsen, Michael, 2016. "The Value of Government Information in an Era of Declining Budgets," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235811, Agricultural and Applied Economics Association.
    10. Karali, Berna & Isengildina-Massa, Olga & Irwin, Scott H. & Adjemian, Michael K., 2016. "Changes in Informational Value and the Market Reaction to USDA Reports in the Big Data Era," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235580, Agricultural and Applied Economics Association.
    11. R. Karina Gallardo & B. Wade Brorsen & Jayson Lusk, 2010. "Prediction markets: an experimental approach to forecasting cattle on feed," Agricultural Finance Review, Emerald Group Publishing, vol. 70(3), pages 414-426, November.
    12. Brittain, Lee & Garcia, Philip & Irwin, Scott H., 2011. "Live and Feeder Cattle Options Markets: Returns, Risk, and Volatility Forecasting," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 36(1), April.
    13. Olga Isengildina-Massa & Scott H. Irwin & Darrel L. Good & Jennifer K. Gomez, 2008. "Impact of WASDE reports on implied volatility in corn and soybean markets," Agribusiness, John Wiley & Sons, Ltd., vol. 24(4), pages 473-490.
    14. Etienne, Xiaoli L. & Irwin, Scott H. & Garcia, Philip, 2014. "Bubbles in food commodity markets: Four decades of evidence," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 129-155.
    15. Lehecka, Georg V., 2013. "The Reaction of Corn and Soybean Futures Markets to USDA Crop Progress and Condition Information," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 142491, Southern Agricultural Economics Association.
    16. Karali, Berna & Dorfman, Jeffrey H. & Thurman, Walter N., 2008. "Do Inventory and Time-to-Delivery Effects Vary Across Futures Contracts? Insights from a Smoothed Bayesian Estimator," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6084, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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    Keywords

    Livestock Production/Industries; Marketing;

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