The Value of USDA Situation and Outlook Information in Hog and Cattle Markets

Abstract

This study investigates the impact of six major USDA reports in hog and cattle markets: Cattle; Cattle on Feed; Cold Storage; Hogs and Pigs; Livestock, Dairy, and Poultry Outlook (LDPO); and World Agricultural Supply and Demand Estimates (WASDE). A TARCH-in-mean model, with dummy variables to measure the impact of USDA reports and other external factors, is used to model close-to-open live-lean hog and live cattle futures returns from January 1985 through December 2004. The analysis revealed a statistically significant impact of all but Cattle and Cold Storage reports in live/lean hog futures, and all but Cold Storage reports in live cattle futures. Hogs and Pigs reports had the highest impact on live/lean hog returns by increasing conditional standard deviation 96%. Cattle, Cattle on Feed, and Hogs and Pigs reports had the highest impact on live cattle returns by increasing conditional standard deviation between 26% and 37.5%.

Keywords

• cattle
• event study
• hogs
• livestock
• public information
• tarch model
• usda reports