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Procurement Price Relationships for Fed Cattle and Hogs: Importance of the Cash Market in Price Discovery
Author(s) -
Lee Yoonsuk,
Ward Clement E.,
Brorsen B. Wade
Publication year - 2012
Publication title -
agribusiness
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.57
H-Index - 43
eISSN - 1520-6297
pISSN - 0742-4477
DOI - 10.1002/agr.21288
Subject(s) - price discovery , cointegration , cash , granger causality , fed cattle , economics , cash management , market price , monetary economics , procurement , causality (physics) , financial economics , business , finance , econometrics , biology , zoology , management , futures contract , physics , quantum mechanics
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.