Skip to main content Accessibility help
×
Home

Causality Between Captive Supplies and Cash Market Prices in the U.S. Cattle Procurement Market

  • In Bae Ji (a1) and Chanjin Chung (a2)

Abstract

This study tests the causal direction between captive supply and cash market price in the U.S. cattle procurement market. Finding the correct causality should provide useful information to the decades-long debate on packers’ anti-competitive behavior in the U.S. cattle procurement market. It should also help researchers find better econometric specifications for the cash price-captive supply relationship. Two causality tests—the Granger test and the Modified Wald test—were conducted. Overall test results indicate that captive supply causes cash market price, and it favors the price-dependent model.

Copyright

References

Hide All
DeJong, D.N., Nankervis, J.C., Savin, N.E., and Whiteman, C.H. 1992. “The Power Problem of Unit Root Tests in Time Series with Autoregressive Errors.” Journal of Economics 53(1/3): 323343.
Diebold, F.X., and Rudebusch, G.D. 1991. “On the Power of Dickey-Fuller Tests against Fractional Alternatives.” Economics Letters 35(2): 673682.
Domina, D.A. 2004. “Proving Anti-Competitive Conduct in the U.S. Courtroom: The Plaintiff's Argument in Pickett v. Tyson Fresh Meats, Inc.Journal of Agricultural & Food Industrial Organization 2: Article 8.
Elam, E. 1992. “Cash Forward Contracting vs. Hedging of Fed Cattle, and the Impact of Cash Contracting on Cash Prices.” Journal of Agricultural and Resource Economics 17(1): 205217.
Granger, C.W.J. 1969. “Investigating Causal Relations by Econometric Models and Cross-Spectral Methods.” Econometrica 37(3): 424438.
Greene, W.H. 2008. Econometric Analysis. New York University: Prentice-Hall Inc.
Hayenga, M.L., Koontz, S.R., and Schroeder, T.C. 1996. “Definition of Regional Cattle Procurement Markets.” Publication No. GIPSA-RR 96-11996, Grain Inspection, Packers and Stockyards Administration, U.S. Department of Agriculture, Washington, D.C.
Konya, L. 2004. “Unit Root, Cointegration and Granger Causality Test Results for Export and Growth in OECD Countries.” International Journal of Applied Econometrics and Quantitative Studies 1(2): 6794.
Kwiatkowski, D., Phillips, P.C.B., Schmidt, P., and Shin, Y. 1992. “Testing the Null Hypothesis of Stationarity against the Alternative of a Unit Root.” Journal of Econometrics 54(1): 159178.
Lutkepohl, H., and Xu, F. 2009. “The Role of the Log Transformation in Forecasting Economic Variables.” CESIFO Working Paper No. 2591, Center for Economic Studies and Ifo Institute for Economic Research, Munich, Germany.
Muth, M.K., and Wohlgenant, M.K. 1998. “Measuring the Degree of Oligopsony Power in the Beef Packing Industry in the Absence of Marketing Input Quantity Data.” Journal of Agricultural and Resource Economics 24(2): 299312.
Park, M., Jin, Y., and Love, A.H. 2011. “Dynamic and Contemporaneous Causality in a Supply Chain: An Application of the U.S. Beef Industry.” Applied Economics 43(30): 47854801.
Schroeder, T.C., Jones, R., Mintert, J., and Barkely, A.P. 1993. “The Impact of Forward Contracting on Fed Cattle Prices.” Review of Agricultural Economics 15(2): 325337.
Schroeter, J.R. 2007. “Captive Supplies and Cash Market Prices for Fed Cattle: A Dynamic Rational Expectations Model of Delivery Timing.” Working Paper No. 07002, Department of Economics, Iowa State University, Ames, IA.
Schroeter, J.R., and Azzam, A. 2004. “Captive Supplies and Cash Market Prices for Fed Cattle: The Role of Delivery Timing Incentives.” Agribusiness 20(3): 347362.
Taylor, C.R. 2006. “Proving Anti-Competitive Conduct in the U.S. Courtroom: Economic Issues with the Courts’ Opinions in Pickett v. Tyson Fresh Meats, Inc.Journal of Agricultural & Food Industrial Organization 4(1): Article 9.
Toda, H.Y., and Yamamoto, T. 1995. “Statistical Inference in Vector Autoregressions with Possibly Integrated Processes.” Journal of Econometrics 66(1/2): 225250.
U.S. Department of Agriculture. 2010. “LGMN Reporter Handbook.” Agricultural Marketing Service, U.S. Department of Agriculture, Washington, D.C. Available at http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5079694 (accessed November 25, 2011).
U.S. Department of Agriculture. 2011. “Weekly Direct Steer and Heifer Slaughter Cattle Summary.” Agricultural Marketing Service, U.S. Department of Agriculture, Washington, D.C. Available at http://www.ams.usda.gov/AMSv1.0/ams.fetchTemplateData.do?startIndex=1&template=TemplateW&page=SearchLivestockSlaughterCattleWeeklySummaryReports (accessed November 25, 2011).
Ward, C.E. 2005. “Beef Packers’ Captive Supplies: An Upward Trend? A Pricing Edge?Choices 20(2): 167171.
Ward, C.E., Koontz, S.R., and Schroeder, T.C. 1998. “Impacts from Captive Supplies on Fed Cattle Transaction Prices.” Journal of Agricultural and Resource Economics 23(2): 494514.
Ward, C.E., Schroeder, T.C., Barkley, A.P., and Koontz, S.R. 1996. “Role of Captive Supplies in Beef Packing.” Publication No. GIPSA-RR 96-3, Grain Inspection, Packers and Stockyards Administration, U.S. Department of Agriculture, Washington, D.C.
Zhang, M., and Sexton, R.J. 2000. “Captive Supplies and the Cash Market Price: A Spatial Markets Approach.” Journal of Agricultural and Resource Economics 25(1): 88108.

Keywords

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed