Hostname: page-component-cd9895bd7-lnqnp Total loading time: 0 Render date: 2024-12-23T09:40:18.632Z Has data issue: false hasContentIssue false
  • English
  • Français

The Effect of the Livestock Mandatory Reporting Act on Market Transparency and Grid Price Dispersion

Published online by Cambridge University Press:  15 September 2016

Scott W. Fausti ,
Bashir A. Qasmi ,
Jing Li  and
Mathew A. Diersen
Scott W. Fausti
Affiliation:
Department of Economics at South Dakota State University in Brookings, South Dakota
Bashir A. Qasmi
Affiliation:
Department of Economics at South Dakota State University in Brookings, South Dakota
Jing Li
Affiliation:
Department of Economics at South Dakota State University in Brookings, South Dakota
Mathew A. Diersen
Affiliation:
Department of Economics at South Dakota State University in Brookings, South Dakota
Get access Rights & Permissions [Opens in a new window]

Abstract

The Livestock Mandatory Reporting Act (MPR) of 1999 was implemented in April 2001. Empirical evidence indicates a significant change in intra-week price dispersion associated with publicly reported fed cattle grid premiums and discounts occurring after MPR implementation.

The research objective is to evaluate the effect of increased market transparency resulting from implementation of MPR, on grid intra-week premium and discount dispersion levels. Empirical results suggest that increased transparency is compatible with intra-week dispersion levels increasing. Increased dispersion suggests that during the pre-MPR period weekly premium and discount data may have been drawn from a non-representative sample. From the empirical evidence, it is concluded that reform of the livestock price-reporting system appears to have been necessary in the case of publically reported grid premiums and discounts.

Keywords

fed cattlegrid pricingmarket transparencyprice dispersionprice volatilitymandatory livestock price reporting
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 39 , Issue 3 , October 2010 , pp. 457 - 467
Copyright
Copyright © 2010 Northeastern Agricultural and Resource Economics Association 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Anderson, J.D., Ward, C.E., Koontz, S.R., Peel, D.S., and Trapp, J.N. 1998. “Experimental Simulation of Public Information Impacts on Price Discovery and Marketing Efficiency in the Fed Cattle Market.” Journal of Agricultural and Resource Economics 23(1): 262–278.Google Scholar
Azzam, A. 2003. “Market Transparency and Market Structure: The Livestock Mandatory Reporting Act of 1999.” American Journal of Agricultural Economics 85(2): 387–395.Google Scholar
Cross, H.R., and Savell, J.W. 1994. “What Do We Need for a Value-Based Beef Marketing System?” Meat Science 36(1/2) 19–27.Google Scholar
Fausti, S.W., and Diersen, M.A. 2004. “The Voluntary Reporting System's Ability to Provide Price Transparency in the Cash Market for Dressed Steers: Evidence from South Dakota.” Journal of Agricultural and Resource Economics 29(3): 553–566.Google Scholar
Fausti, S.W., Diersen, M.A., and Qasmi, B.A. 2007. “Public Price Reporting in the Cash Market for Live Cattle: A Spatial Market Approach.” Agricultural and Resource Economics Review 36(2): 336–348.CrossRefGoogle Scholar
Fausti, S.W. and Feuz, D.M. 1995. “Production Uncertainty and Factor Price Disparity in the Slaughter Cattle Market: Theory and Evidence.” American Journal of Agricultural Economics 77(3): 533–540.CrossRefGoogle Scholar
Fausti, S.W. Feuz, D.M., and Wagner, J.J. 1998. “Value Based Marketing for Fed Cattle: A Discussion of the Issues.” International Food and Agribusiness Management Review 1(1): 73–90.CrossRefGoogle Scholar
Fausti, S.W. and Qasmi, B.A. 2002. “Does the Producer Have an Incentive to Sell Fed Cattle on a Grid?” International Food and Agribusiness Management Review 5(1): 23–39.Google Scholar
Fausti, S.W., Qasmi, B.A., Landblom, D.G., Beutler, M.A., Johnson, P., Gates, R., Patterson, H., and Salverson, R. 2007. “Public Price Reporting, Marketing Channel Selection, and Price Discovery: The Perspectives of Cow/Calf Producers in the Dakotas.” Journal of Agribusiness 25(1): 59–76.Google Scholar
Feuz, D.M. 1999. “Market Signals in Value-Based Pricing Premiums and Discounts.” Journal of Agricultural and Resource Economics 24(2): 327–341.Google Scholar
GAO [see U.S. Government Accountability Office].Google Scholar
Grunewald, S, Schroeder, T.C., and Ward, C.E. 2004. “Cattle Feeder Perceptions of Livestock Mandatory Price Reporting.” Review of Agricultural Economics 26(4): 521–538.CrossRefGoogle Scholar
Hogan, R., and Ward, C.E. 2005. “Examining the Fed Cattle Choice-Select Discount.” Paper presented at the Southern Agricultural Economics Association Annual Meeting, Little Rock, AK (February). Available at http://ageconsearch.umn.edu/bitstream/35549/l/sp05ho04.pdf (accessed January 27, 2010).Google Scholar
Johnson, H.C., and Ward, C.E. 2005. “Market Signals Transmitted by Grid Pricing.” Journal of Agricultural and Resource Economics 30(3): 561–579.Google Scholar
Newbold, P. 1995. Statistics for Business and Economics (4th edition). Upper Saddle River, NJ: Prentice-Hall, Inc. Google Scholar
Pendell, D.L., and Schroeder, T.C. 2006. “Mandatory Price Reporting and Fed Cattle Market Integration.” Journal of Agricultural and Resource Economics 31(3): 568–579.Google Scholar
Perry, J., MacDonald, J., Nelson, K, Hahn, W., Arnade, C., and Plato, G. 2005. “Did Mandatory Requirement Aid the Market?” Economic Outlook Report No. LDP-M-135-01, Economic Research Service, U.S. Department of Agriculture, Washington, D.C.Google Scholar
Priebe, J. 2004. “The Effect of Mandatory Price Reporting on the Structure of Weekly Reported Grid Premium and Discount Prices for Fed Cattle.” Master's thesis, Department of Economics, South Dakota State University, Brookings, SD.Google Scholar
Sandmo, A. 1971. “On the Theory of the Competitive Firm Under Price Uncertainty.” American Economic Review 61(1): 65–73.Google Scholar
Tomek, W.G. 1980. “Price Behavior in a Declining Terminal Market.” American Journal of Agricultural Economics 62(3): 434–444.Google Scholar
U.S. Department of Agriculture. 2004. “Packers and Stockyards Statistical Report: 2002 Reporting Year.” Grain Inspection, Packers & Stockyards Administration (GIPSA), U.S. Department of Agriculture, Washington, D.C.Google Scholar
U.S. Government Accountability Office. 2005. “Livestock Market Reporting: USDA Has Taken Some Steps to Ensure Quality, but Additional Efforts are Needed.” Report No. GAO-06-202, U.S. Government Printing Office, Washington, D.C.Google Scholar
Value Based Marketing Task Force. 1990. The War on Fat. National Cattleman's Association, Denver, CO.Google Scholar
Wachenheim, C.J., and DeVuyst, E.A. 2001. “Strategic Response to Mandatory Reporting Legislation in the U.S. Livestock and Meat Industries: Are Collusive Opportunities Enhanced?” Agribusiness 17(2): 177–195.Google Scholar
Ward, C.E. 2006. “An Assessment of the Livestock Mandatory Reporting Act.” Fact Sheet No. F-606, Oklahoma Cooperative Extension Service, Oklahoma State University, Stillwater, OK.Google Scholar
Wooldridge, J.M. 2006. Introductory Econometrics: A Modern Approach (3rd edition). Florence, KY: Thomson Southwestern Press. Google Scholar