Dynamically Changing Cattle Market Linkages with Supply-Side-Controlled Transitions

Abstract

Cattle are costly to transport, which could lead to segmented regional cattle markets. The cointegration of cattle prices over regions has been of research interest for decades. This article investigates price cointegration between regional cattle markets in the United States and proposes 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.