Threshold Effects on Procurement Price Relationships for U.S. Fed Cattle and Hogs

초록

This paper estimates threshold effects of cointegrated variables between a negotiated cashprice and other Alternative Marketing Arrangements (AMAs) prices to identify the possiblechanges of the role of a cash price in price discovery for U.S.- fed cattle and hogs. Thispaper finds that threshold effects on the cointegrated prices are more likely to occur forU.S.-fed cattle and not likely to occur for hogs. This result implies there are multipleequilibria in some pairs of negotiated cash prices and other prices in AMAs for fed cattle. That is, the relationship between cash price and procurement prices is unstable. For hogs,there exists one equilibrium relationship in cointegrated prices. The results in this papercould be essential for a recurring political argument related to a proposed ban on packerownership of U.S. livestock, that is, eliminating forward contracts which are both AMAs, andthe mandated use of the cash market by packers.

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