Tail price risk spillovers along the US beef and pork supply chains

Abstract

The objective of this paper was to investigate the intensity and the pattern of tail price risk spillovers in the US beef and pork industries. To this end, it estimates CoVaR functions for directly linked market pairs (farm–wholesale and wholesale–retail) along the relevant supply chains using quantile regressions. Over the total sample (1980–2020) and two sub‐samples (1980–1999 and 2000–2020), the beef industry appears to exhibit a higher degree of price risk connectedness relative to the pork industry. Positive and negative tail price events are transmitted between markets with the same intensity. However, tail price events (irrespective of sign) are likely to spillover with greater intensity backwards in the supply chain than forwards. This pattern of transmission may be a cause of concern about the efficiency of alternative meat marketing arrangements as risk‐sharing instruments.