Impacts of corn price and imported beef price on domestic beef price in South Korea

Abstract

South Korea is one of the largest beef importing countries in the world. Australia, USA, and New Zealand provide the majority of beef they import. The objective of this study is to evaluate the price relationship of Korean cattle and corn, prices of the imported beef and corn, and prices of Korean cattle and imported beef. We examine threshold points using threshold vector autoregressive (TVAR) model by assuming the presence of nonlinearity. We find that there are two thresholds in Australian beef price with first difference data. This study finds that the current Korean beef price is positively affected by increasing in the previous month of Australian beef price in first and second regimes. Changing in previous corn price has no significant impact on current Korean cattle price in the second regime. In the third regime, we find that current Korean cattle price is positively affected by previous corn price whereas no impact from previous Australian beef price. In this study, we could not use data for the USA due to the periods of bovine spongiform encephalopathy (BSE). However, we expect that current Korean beef price is significantly affected by changing in the previous month of US beef price using data after the periods of BSE.