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The Long‐Term Effects of Meat Recalls on Futures Markets
Author(s) -
Houser Matthew,
Dorfman Jeffrey H,
Rejesus Roderick M
Publication year - 2019
Publication title -
applied economic perspectives and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.4
H-Index - 49
eISSN - 2040-5804
pISSN - 2040-5790
DOI - 10.1093/aepp/ppy010
Subject(s) - food safety , harm , futures contract , business , revenue , beef industry , outbreak , economic impact analysis , agricultural economics , environmental health , economics , food science , finance , medicine , chemistry , virology , political science , law , microeconomics
Over the past twenty years, there has been an increasing trend in the number of food safety events. 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, with potential causes being 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 look beyond the impact on processors to see the amount of impact transmitted through price channels to cattle farmers. 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 food safety events act together, adversely impacting prices and decreasing farm‐level revenue. The finding that economic harm to the beef industry from food safety events lingers for at least two years suggests that the industry should do more to reduce food safety incidents.