Procurement Price Relationships for Fed Cattle and Hogs: Importance of the Cash Market in Price Discovery

ABSTRACT Reduced reliance on cash markets for fed cattle and hogs raises questions about the role of cash prices in price discovery. Weekly data from mandatory price reports were used to determine whether cash market prices were cointegrated with and exhibited Granger causality with other procuremen...

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Bibliographic Details
Published in:Agribusiness (New York, N.Y.) N.Y.), 2012-03, Vol.28 (2), p.135-147
Main Authors: Lee, Yoonsuk, Ward, Clement E., Brorsen, B. Wade
Format: Article
Language:English
Subjects:
Agribusiness
Bidirectional
Cash
Cattle
Causality
Hogs
Livestock industry
Market prices
Markets
Procurement
Q13
Q18
Studies
Swine
Viability
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Summary:ABSTRACT Reduced reliance on cash markets for fed cattle and hogs raises questions about the role of cash prices in price discovery. Weekly data from mandatory price reports were used to determine whether cash market prices were cointegrated with and exhibited Granger causality with other procurement prices. Cash prices were cointegrated with all but one cattle and one hog procurement price series over the 2001–2010 period. Cash market prices Granger cause all other procurement prices and bidirectional causality was found in some but not all cases. Results for three 3‐year subperiods showed some decline in cointegration and causality for hogs. The cash market remains important for price discovery but continuing market thinness, especially in hogs, raises questions regarding viability of the cash market in the future.
ISSN:0742-4477
1520-6297
DOI:10.1002/agr.21288