The Long‐Term Effects of Meat Recalls on Futures Markets

Over the past twenty years, there has been an increasing trend in the number of food safety events. Despite increased safety control standards, foodborne disease outbreaks continue to impact the food supply. A common source of foodborne illness and fatal infection is beef, with potential causes being E. coli 0157: H7, Listeria Monocytogenes, and Salmonella. Certain companies have even been bankrupted, unable to overcome the social costs and economic losses associated with recalls. We look beyond the impact on processors to see the amount of impact transmitted through price channels to cattle farmers. We examine beef recalls over a twenty‐year period through an accumulated two‐year index to see if there is a prolonged effect of recalls on current weekly cattle prices. We find that food safety events act together, adversely impacting prices and decreasing farm‐level revenue. The finding that economic harm to the beef industry from food safety events lingers for at least two years suggests that the industry should do more to reduce food safety incidents.