Hostname: page-component-586b7cd67f-t7fkt Total loading time: 0 Render date: 2024-11-25T20:57:33.175Z Has data issue: false hasContentIssue false
  • English
  • Français

Impact of Mandatory Price Reporting on Hog Market Integration

Published online by Cambridge University Press:  26 January 2015

Jason R.V. Franken ,
Joe L. Parcell  and
Glynn T. Tonsor
Jason R.V. Franken
Affiliation:
Department of Agricultural and Applied Economics, University of Missouri, Columbia, Missouri
Joe L. Parcell
Affiliation:
Department of Agricultural and Applied Economics, University of Missouri, Columbia, Missouri
Glynn T. Tonsor
Affiliation:
Department of Agricultural Economics, Kansas State University, Manhattan, Kansas
Get access Rights & Permissions [Opens in a new window]

Abstract

This research examines whether mandatory price reporting (MPR) impacted price relationships among U.S. hog markets. Markets are cointegrated before and after MPR enactment, but not fully integrated in either period. Terminal markets adjust to shocks in the Iowa-Southern Minnesota market more quickly and Iowa-Southern Minnesota prices adjust to shocks in terminal markets more slowly following MPR enactment. Granger causality tests indicate a causal flow from terminal markets to Iowa-Southern Minnesota prices before MPR and a causal reversal after MPR enactment. These results likely reflect decreases in volume of negotiated sales, particularly in terminal markets, and greater reliance on mandatorily reported prices for market information.

Keywords

cointegrationhog marketsmandatory price reportingmarket integrationregime shiftQ13
Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 43 , Issue 2 , May 2011 , pp. 229 - 241
Copyright
Copyright © Southern Agricultural Economics Association 2011

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

Azzam, A. “Market Transparency and Market Structure: The Livestock Mandatory Reporting Act of 1999.” American Journal of Agricultural Economics 85,2(2003):387–95.10.1111/1467-8276.00127Google Scholar
Bailey, D., and Brorsen, B.W. ’Dynamics of Regional Fed Cattle Prices.” Western Journal of Agricultural Economics 10,1(1985):126–33.Google Scholar
Barrett, C.B., and Li, J.R. “Distinguishing Between Equilibrium and Integration in Spatial Price Analysis.” American Journal of Agricultural Economics 84,2(2002):292–307.10.1111/1467-8276.00298Google Scholar
Benson, B.L., Faminow, M.D., Marquis, M.H., and Sauer, D.G. “Intra-national Effects of a Countervailing Duty on the United States/Canadian Hog Market.” Review of Agricultural Economics 16(1994): 187–201.10.2307/1349462Google Scholar
Bessler, D.A., and Covey, T. “On the Search for Econometric Structure in Agriculture.” American Journal of Agricultural Economics 75(1993): 41–47.10.1093/ajae/75_Special_Issue.41Google Scholar
Brester, G.W., and Goodwin, B.K. “Vertical and Horizontal Price Linkages and Market Concentration of the U.S. Wheat Milling Industry.” Review of Agricultural Economics 15,3(1993): 507–19.10.2307/1349485Google Scholar
Carter, C.A., and Mohapatra, S. “How Reliable are Hog Futures as Forecasts?” American Journal of Agricultural Economics 90,2(2008): 367–78.10.1111/j.1467-8276.2007.01122.xGoogle Scholar
Chen, P.-F., and Lee, C.-C. “Nonlinear Adjustments in Deviations from the Law of One Price for Wholesale Hog Prices.” Agricultural Economics 39,1(2008): 123–34.10.1111/j.1574-0862.2008.00320.xGoogle Scholar
Enders, W. Applied Econometric Time Series. New York: John Wiley & Sons, Inc., 1995.Google Scholar
Engle, R.F., and Granger, C.W.J. “Co-integration and Error Correction: Representation, Estimation, and Testing.” Econometrica 55(1987):251–76.10.2307/1913236Google Scholar
Faminow, M., and Benson, B. “Integration of Spatial Markets.” American Journal of Agricultural Economics 72,1(1990):49–62.10.2307/1243144Google Scholar
Federal Register. Part V, Department of Agriculture, Agricultural Marketing Service, Livestock and Grain Market News Branch: Livestock Mandatory Reporting; Final Rule. National Archives and Records Administration. Friday, December 1, 2000.Google Scholar
Fausti, S.W., and Diersen, M.A. “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 (2004):553–66.Google Scholar
Fausti, S.W., Qasmi, B.A., Li, J., and Diersen, M.A. “The Effect of the Livestock Mandatory Reporting Act on Market Transparency and Grid Price Dispersion.” Agricultural and Resource Economics Review 39,3(2010):457–67.Google Scholar
Frank, J., Gómez, M., Kunda, E., and Garcia, P. “Cash Settlement of Lean Hog Futures Contracts Reexamined.” Paper presented at the NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management, St. Louis, Missouri, April 21-22, 2008.Google Scholar
Franken, J.R.V., Parcell, J.L., Sykuta, M.E., and Fulcher, C.F. “Market Integration: Case Studies of Structural Change.” Agricultural and Resource Economics Review 43,2(2005): 163–72.Google Scholar
Goodwin, B. “Multivariate Cointegration Tests and the Law of One Price in International Wheat Markets.” Review of Agricultural Economics 14,1(1992a):117–24.10.2307/1349612Google Scholar
Goodwin, B. “Forecasting Cattle Prices in the Presence of Structural Change.” Southern Journal of Agricultural Economics 24,2(1992b):11–22.Google Scholar
Goodwin, B., and Piggott, N. “Spatial Market Integration in the Presence of Threshold Effects.” American Journal of Agricultural Economics 83,2(2001):302–17.10.1111/0002-9092.00157Google Scholar
Goodwin, B.K., and Schroeder, T.C. “Cointegration Tests and Spatial Price Linkages in Regional Cattle Markets.” American Journal of Agricultural Economics 73(1991):453–64.Google Scholar
Gregory, A.W., and Hansen, B.E. “Residual-Based Tests for Cointegration in Models with Regime Shifts.” Journal of Econometrics 70(1996):99–126.10.1016/0304-4076(69)41685-7Google Scholar
Grimes, G., and Plain, R. U.S. Hog Marketing Contract Study. Columbia, MO: University of Missouri Department of Agricultural Economics, 2005.Google Scholar
Grimes, G., and Plain, R. U.S. Hog Marketing Contract Study. Columbia, MO: University of Missouri Department of Agricultural Economics, 2007.Google Scholar
Gujarati, D. Basic Econometrics, 3rd ed. New York: McGraw-Hill, Inc., 1995.Google Scholar
Johansen, S. “Statistical Analysis of Cointegration Vectors.” Journal of Economic Dynamics & Control 12(1988):213–54.Google Scholar
Koontz, S.R., Garcia, P., and Hudson, M.A. “Dominant-Satellite Relationships between Live Cattle Cash and Futures Markets.” Journal of Futures Markets 10,2(1990): 123–36.10.1002/fut.3990100204Google Scholar
Lee, Y., Ward, C.E., and Brorsen, B.W. “Relationships among Prices across Alternative Marketing Arrangements for Fed Cattle and Hogs.” Paper presented at the Southern Agricultural Economics Association Annual Meeting, Orlando, FL, February 6–9, 2010.Google Scholar
McNew, K., and Fackler, P.L. “Testing Market Equilibrium: Is Cointegration Informative.” Journal of Agricultural and Resource Economics 22,2(1997): 191–207.Google Scholar
Osterwald-Lenum, M. “A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics.” Oxford Bulletin of Economics and Statistics 54(1992):461–71.10.1111/j.1468-0084.1992.tb00013.xGoogle Scholar
Pendell, D.L., and Schroeder, T.C. “Impact of Mandatory Price Reporting on Fed Cattle Market Integration.” Journal of Agricultural and Resource Economics 31,3(2006):568–79.Google Scholar
Plain, R. Personal Communication. Department of Agricultural and Applied Economics, University of Missouri, February 15, 2010.Google Scholar
Schroeder, T.C. “Fed Cattle Spatial Transactions Price Relationships.” Journal of Agricultural and Applied Economics 29,2(1997):347–62.Google Scholar
Schroeder, T.C., and Goodwin, B.K. “Regional Fed Cattle Price Dynamics.” Western Journal of Agricultural Economics 15,1(1990):111–22.Google Scholar
Schroeder, T.C., and Goodwin, B.K. “Price Discovery and Cointegration for Live Hogs.” Journal of Futures Markets 11,6 (1991):685–96.10.1002/fut.3990110604Google Scholar
Spirtes, P., Glymour, C., and Scheines, R. Causality, Prediction, and Search. Cambridge, MA: MIT Press, 2000.Google Scholar
Stockton, M.C., Bessler, D.A., and Wilson, R.K. “Price Discovery in Nebraska Cattle Markets.” Journal of Agricultural and Applied Economics 42,1(2010): 1–14.S1074070800003254Google Scholar
Wang, D., and Tomek, W.G. “Commodity Prices and Unit Root Tests.” American Journal of Agricultural Economics 89,4(2007):873–89.10.1111/j.1467-8276.2007.01031.xGoogle Scholar
Ward, C.E. “Preferential Cattle and Hog Pricing by Packers: Evidence from Mandatory Price Reports.” Paper presented at the Western Agricultural Economics Association Annual Meeting, Big Sky, MT, June 23-24, 2008. Internet site: http://ageconsearch.umn.edu/bitstream/37989/2/AMAPrefP%27gWAEA.pdf (Accessed February 22, 2010).Google Scholar
Wellman, A. Highlights of the New Chicago Mercantile Exchange Lean Hogs Futures Contract. University of Nebraska Extension Publication NF96-261, 1996. Internet site: http://digital commons.unl.edu/cgi/viewcontent.cgi?article= 1392&context=extensionhist (Accessed March 22, 2010).Google Scholar
Working, H. “Note on the Correlation of First Differences of Averages in a Random Chain.” Econometrica 28,4(1960):916–18.10.2307/1907574Google Scholar
Yang, J., Bessler, D.A., and Leatham, D.J. “Asset Storability and Price Discovery in Commodity Futures Markets: A New Look.” Journal of Futures Markets 21,3(2001):279–300.10.1002/1096-9934(200103)21:3<279::AID-FUT5>3.0.CO;2-L3.0.CO;2-L>Google Scholar