Structural changes in fed cattle basis and the implications on basis forecasting

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Show simple item record Highfill, Brian James 2016-12-16T19:25:25Z 2016-12-16T19:25:25Z 2017-05-01 en_US
dc.description.abstract The past several years has marked one of the most heightened periods of fed cattle basis volatility since the installment of live cattle futures contracts. Understanding basis, the difference between local cash price and the futures contract price, is imperative when making marketing and procurement decisions. In the face of increased volatility, the ability to produce accurate basis expectations is no simple task. The purpose of these analyses was to develop econometric models to determine the greatest influencers of fed cattle basis, to test the presence of structural changes in the determinants of fed cattle basis, and to compare out-of-sample forecasting performance. This study analyzed in-sample econometric models using monthly data from January 2003 through September 2016, then compared the results of the competing models. Using the same time period, we then identified the presence of structural breaks in the data. Furthermore, this study analyzed the out-of-sample forecasting performance for January 2012 through September 2016. The out-of-sample results were then compared to in-sample estimations and historical average basis models. The in-sample estimations indicated the important factors that influence fed cattle basis. The results indicate that there are multiple structural breaks present in the determinants of fed cattle basis examined during this study. We can robustly conclude that there was a market structural break present in the fourth quarter of 2013 and within the 2005-2006 time period. The results indicate that the out-of-sample regression estimations were outperformed by historical average models and did not improve our ability to accurately forecast basis. Overall, a 3 or 4 year historical average model should be preferred over econometric estimations when forecasting fed cattle basis. en_US
dc.language.iso en_US en_US
dc.publisher Kansas State University en
dc.subject Fed Cattle Basis en_US
dc.subject Structural Change
dc.subject Prediction Error
dc.title Structural changes in fed cattle basis and the implications on basis forecasting en_US
dc.type Thesis en_US Master of Science en_US
dc.description.level Masters en_US
dc.description.department Department of Agricultural Economics en_US
dc.description.advisor Glynn T. Tonsor en_US 2017 en_US May en_US

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