An examination of price transmission in the United States beef, pork, and broiler industries
Date
2006
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Publisher
University of Delaware
Abstract
The US beef, pork, and broiler industry structures have undergone significant changes over the course of the last thirty years. Such changes include increased concentration at the wholesale/packer level as well as increased vertical integration or vertical coordination. With increasing consolidation and changing industry structure, the question of imperfectly competitive markets arises. As a result, it is relevant to examine the effect on price flow direction and symmetry between industry segments within each animal protein industry studied here as there may be important implications for producers and consumers. ☐ Previous research has sought to identify if price transmission asymmetries exist in each of the beef, pork, and broiler industries. However, while evidence suggests such asymmetries exist, little work has been performed to attempt to explain why price transmission asymmetries arise. The purpose of this thesis is to test for price transmission asymmetries in each of the beef, pork, and broiler industries from 1986 through 2003. Based on those results, attempts to make comparisons of the industry structure and to draw conclusions as to why price transmission will be undertaken. ☐ A five step process including lag length determination, unit root testing, Granger causality testing, price transmission asymmetry testing, and Cumulative Sum (CUSUM) and Cumulative Sum of Squares (CUSUMSQ) stability tests were utilized. Results indicated the presence of price transmission asymmetries in the US beef, pork, and broiler industries. Results were unclear as to the effect that concentration and integration have on the occurrence of price transmission asymmetries. Results suggest that concentration at the retail sector may have as much or more of an influence on price transmission asymmetries as vertical integration or increased concentration at the wholesale level of the US beef, pork, and broiler industries.