Procurement Price Relationships for Fed Cattle and Hogs: Importance of the Cash Market in Price Discovery
Article first published online: 27 MAR 2012
© 2012 Wiley Periodicals, Inc.
Volume 28, Issue 2, pages 135–147, Spring 2012
How to Cite
Lee, Y., Ward, C. E. and Brorsen, B. W. (2012), Procurement Price Relationships for Fed Cattle and Hogs: Importance of the Cash Market in Price Discovery. Agribusiness, 28: 135–147. doi: 10.1002/agr.21288
- Issue published online: 16 APR 2012
- Article first published online: 27 MAR 2012
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.