Fed Cattle Market Integration in Mandatory Price Reporting Era

Abstract

Spatial market integration ensures price discovery, market efficiency and market competition. Price integration in fed cattle markets is a significant subject of research due to perishable nature of fed cattle, geographical distance between production and consumptions areas, and considerable transportation cost. This study examines United States fed cattle market integration using weekly price series of live steer and heifer for five major fed cattle markets in the era of Livestock Mandatory Price Reporting Act. Results indicate that all markets are cointegrated with sharing a common stochastic trend suggesting the Law of One Price. Causal relationship was found among most of the regional markets in case of steer prices, while the relationship was absent among most of the markets for heifer prices.

Keywords

• spatial market integration
• price co-integration
• price relationship