Do hog breeds matter? Investigating the price volatility in the Taiwan’s auction market

Abstract

The study analyzes the dynamic differences between the prices of black hogs and white hogs in Taiwan and determines whether these two products should be viewed as homogeneous commodities by analyzing their price volatility. Previous studies have shown that the differences in auction prices stem from the traits of the individual hogs rather than certain breeds demanding a premium because of their superior meat quality. Methodologically, this study utilizes the multivariate GARCH and the constant conditional correlation models to analyze the average daily prices of the two breeds generated by random auction sequences. Data were collected from 1485 observations, from January 2009 to December 2013, of the Miaoli hog auction market of Taiwan. Based on the dissimilarity of price volatility structures and the low correlation factor between the black hogs and white hogs, this study concludes that these two hog breeds should be regarded as heterogeneous products. This conclusion should serve as a reference for the local hog producers when searching for the best economic traits of indigenous breeds in terms of rearing the potential as well as for the stakeholders when developing the breed-specific marketing strategies.