Causality Between Captive Supplies and Cash Market Prices in the U.S. Cattle Procurement Market

Abstract

This study tests the causal direction between captive supply and cash market price in the U.S. cattle procurement market. Finding the correct causality should provide useful information to the decades-long debate on packers’ anti-competitive behavior in the U.S. cattle procurement market. It should also help researchers find better econometric specifications for the cash price-captive supply relationship. Two causality tests—the Granger test and the Modified Wald test—were conducted. Overall test results indicate that captive supply causes cash market price, and it favors the price-dependent model.