How has price discovery in the beef complex changed over time?

Abstract

The negotiated cash market for live cattle has experienced significant reduction in volume and regional representativeness over the past few decades as a shift towards alternative marketing methods has occurred. It is important to understand how this shift may have changed the cash market’s role in price discovery and relationship to other related markets such as the live cattle futures or boxed beef markets. Determining each market’s role in price discovery and interaction amongst the other markets is valuable in assessing whether the current markets provide sufficient and accurate pricing information for fed cattle. In this study, weekly price series data from January 2002 through July 2019 is used to determine the relationship between the negotiated cash live cattle market, the live cattle futures market, and the boxed beef market. The study also assesses whether a shift has occurred in this relationship, and if so, when that shift occurs. Findings indicate that the live cattle futures market is dominant in price discovery and that more research would likely be necessary to better understand boxed beef’s relationship to both the cash and futures markets.