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Retail price responses to changes in wholesale prices in the US beef industry: differences among quality grades and primal cuts

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  • Prasanna Surathkal
  • Chanjin Chung

Abstract

This study examines the transmission of wholesale prices to retail prices for differentiated beef products. Specifically, we study vertical price movement for products differentiated by quality grades and primal cuts in the US beef industry. Our study considers two quality grades– United States Department of Agriculture (USDA) Choice and USDA Select, and three primal cuts– chuck, round and sirloin. Using threshold-based autoregressive and error correction models, and non-linear impulse response functions, we explore if characteristics of price adjustment differ by quality attributes of the products. Results show that there exists the ‘rocket and feather’ effect in the adjustment of retail prices of most beef grades and cuts in response to changes in wholesale prices, and such asymmetric adjustment effect is more pronounced for higher quality grade (Choice) than lower quality grade (Select). Evidence of similar price adjustment is found from the high-quality cut (sirloin). Our results underscore the differences in price adjustment by product quality in the US beef industry.

Suggested Citation

  • Prasanna Surathkal & Chanjin Chung, 2017. "Retail price responses to changes in wholesale prices in the US beef industry: differences among quality grades and primal cuts," Applied Economics, Taylor & Francis Journals, vol. 49(54), pages 5512-5522, November.
    • Handle: RePEc:taf:applec:v:49:y:2017:i:54:p:5512-5522
    DOI: 10.1080/00036846.2017.1311003
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    References listed on IDEAS

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    1. Pavel Vavra & Barry K. Goodwin, 2005. "Analysis of Price Transmission Along the Food Chain," OECD Food, Agriculture and Fisheries Papers 3, OECD Publishing.
    2. Roeger, Edward & Leibtag, Ephraim S., 2011. "How Retail Beef and Bread Prices Respond to Changes in Ingredient and Input and Costs," Economic Research Report 102757, United States Department of Agriculture, Economic Research Service.
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    Cited by:

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