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Price Transparency in the Voluntary Price Reporting System for Live Cattle: Theory and Empirical Evidence from South Dakota

  • Fausti, Scott

    ()

    (Department of Economics, South Dakota State University)

  • Diersen, Matthew

    ()

    (Department of Economics, South Dakota State University)

The ability of the former federal voluntary price reporting system to facilitate market efficiency in the cash markets for U.S. livestock was questioned by producer groups and academic researchers prior to implementation of federal mandatory price reporting regulations. In the cash market for slaughter cattle, concerns raised in the literature centered on the effect of thinning cash markets and strategic price reporting behavior on the robustness of voluntary cash price reports issued by the USDA-Agricultural Marketing Services. A theoretical framework is developed describing the interregional spatial linkages between cash markets and price reporting regimes (mandatory versus voluntary). Data from South Dakota and Nebraska cash markets for live cattle are used to test if the conditions necessary for interregional price transparency did exist prior to implementation of federal price reporting regulations. A set of testable hypotheses, based on the theoretical framework, is developed to test if the concerns raised in the literature about the voluntary price reporting system can be empiracally verified. The empirical results do not support the literature's proposition that the voluntary price reporting system for live cattle failed to provide timely and accurate market price information to the cash market prior to the implementation of the federal mandatory price reporting system in South Dakota and Nebraska. Furthermore, empirical evidence does not support the suppostion that a thinning cash market or strategic price reporting had a significant negative effect on the AMS voluntary price reporting system's accuracy or timely transmission of price information. Therefore, we conclude that the AMS voluntary price reporting system provided price transparency for South Dakota and Nebraska producers selling in the cash market and contributed to the price discovery process.

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Paper provided by South Dakota State University, Department of Economics in its series Staff Papers with number 050001.

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Length: 28 pages
Date of creation: May 2005
Date of revision:
Handle: RePEc:sda:staffp:050001
Contact details of provider: Postal: Box 504, Scobey Hall, Brookings, SD 57007-0895
Phone: 605-688-4141
Fax: 605-688-6386
Web page: http://www.sdstate.edu/econ/

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  1. Anderson, John D. & Ward, Clement E. & Koontz, Stephen R. & Peel, Derrell S. & Trapp, James N., 1998. "Experimental Simulation Of Public Information Impacts On Price Discovery And Marketing Efficiency In The Fed Cattle Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(01), July.
  2. Lawrence, John D. & Shaffer, John A. & Hayenga, Marvin L., 1996. "Valuing Public Price Reporting: The Iowa Experience," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 14(1).
  3. Fausti, Scott W. & Diersen, Matthew A., 2004. "The Voluntary Reporting System's Ability to Provide Price Transparency in the Cash Market for Dressed Steers: Evidence from South Dakota," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(03), December.
  4. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  5. Lawrence, John D. & Shafer, John & Hayenga, Marvin L., 1996. "Valuing Public Price Reporting: The Iowa Experience," Staff General Research Papers 5148, Iowa State University, Department of Economics.
  6. Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
  7. McNew, Kevin & Fackler, Paul L., 1997. "Testing Market Equilibrium: Is Cointegration Informative?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(02), December.
  8. Azzeddine Azzam, 2003. "Market Transparency and Market Structure: The Livestock Mandatory Reporting Act of 1999," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 387-395.
  9. Christopher B. Barrett & Jau Rong Li, 2002. "Distinguishing between Equilibrium and Integration in Spatial Price Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 292-307.
  10. McNew, Kevin, 1996. "Spatial Market Integration: Definition, Theory, And Evidence," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 25(1), April.
  11. Bastian, Christopher T. & Koontz, Stephen R. & Menkhaus, Dale J., 2001. "Will Mandatory Price Reporting Improve Pricing And Production Efficiency In An Experimental Market For Fed Cattle?," 2001 Conference, April 23-24, 2001, St. Louis, Missouri 18969, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  12. Cheryl J. Wachenheim & Eric A. DeVuyst, 2001. "Strategic response to mandatory reporting legislation in the U.S. livestock and meat industries: Are collusive opportunities enhanced?," Agribusiness, John Wiley & Sons, Ltd., vol. 17(2), pages 177-195.
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