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Abstract
In this study, we focus on the dynamics in supply and prices of livestock, specifically beef cattle. Beef cattle have a unique and complex lifecycle. Our research results will provide market participants with informative implications thus helping form a more efficient livestock market. The dissertation is composed of three chapters, where we examine the industry from a top-down aspect: from a macro national market, to regional markets, and finally to micro auction sales.
In Chapter I, we examine the dynamics of beef cow supply and the existence of the cattle cycle in light of the shift in the structure of cattle finishing and herd management during the last fifty years. Both first- and second-order stochastic cycle models were used to examine semi-annual and annual U.S. beef cow inventory series. Empirical results obtained by both approaches suggest a significant lengthening cattle cycle of over 15 years, possibly indicating that cycles are disappearing.
In Chapter II, we expand our discussion on the dynamics cattle prices from time series horizon to spatial dimension. Specifically, we examine the cointegration of cattle prices over regions by proposing a simple procedure for incorporating a flexible transition function into an economic indicator-controlled smooth transition autoregressive (ECON－STAR) model to evaluate market dynamics. The empirical results show that these markets have been highly integrated when excess supply exists, but when cattle inventories decrease, the market pattern becomes very regionally segmented.
In Chapter III, we take a micro look at one of the most common price discovery mechanisms in livestock markets, the auction, where we are interested in the sale order effect on the winning prices. We empirically confirmed the existence of the declining price anomaly by introducing the Generalized Extreme Value theory framework. Empirical results indicate that the unit price difference between the first and the last lot sold ranges from $7.82 to $2.31, depending on the average animal weight in that lot. Moreover, we found that the buyer’s maximum valuation on the subsequent object actually declines as he wins more objects, which provides a plausible explanation for the declining price anomaly.
In Chapter I, we examine the dynamics of beef cow supply and the existence of the cattle cycle in light of the shift in the structure of cattle finishing and herd management during the last fifty years. Both first- and second-order stochastic cycle models were used to examine semi-annual and annual U.S. beef cow inventory series. Empirical results obtained by both approaches suggest a significant lengthening cattle cycle of over 15 years, possibly indicating that cycles are disappearing.
In Chapter II, we expand our discussion on the dynamics cattle prices from time series horizon to spatial dimension. Specifically, we examine the cointegration of cattle prices over regions by proposing a simple procedure for incorporating a flexible transition function into an economic indicator-controlled smooth transition autoregressive (ECON－STAR) model to evaluate market dynamics. The empirical results show that these markets have been highly integrated when excess supply exists, but when cattle inventories decrease, the market pattern becomes very regionally segmented.
In Chapter III, we take a micro look at one of the most common price discovery mechanisms in livestock markets, the auction, where we are interested in the sale order effect on the winning prices. We empirically confirmed the existence of the declining price anomaly by introducing the Generalized Extreme Value theory framework. Empirical results indicate that the unit price difference between the first and the last lot sold ranges from $7.82 to $2.31, depending on the average animal weight in that lot. Moreover, we found that the buyer’s maximum valuation on the subsequent object actually declines as he wins more objects, which provides a plausible explanation for the declining price anomaly.