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Rationalizing Time Series Differences Between Cow-Calf And Feeder Returns

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  • Zhao, Huan
  • Hennessy, David A.

Abstract

This paper tries to justify the observation of different return patterns in the upstream and downstream sectors of US beef production. It builds a dynamic rational expectation model separating the cow-calf and feeding sector with the former sector being the residual claimer. The model shows that the cow-calf operation has positively autocorrelated return pattern while the feeding operation return only reflects random shock. Empirical study shows that 85.4% of the Ricardian rent is passed through to the upstream sector, and the downstream sector can only claim the unexpected return resulting from random shocks.

Suggested Citation

  • Zhao, Huan & Hennessy, David A., 2009. "Rationalizing Time Series Differences Between Cow-Calf And Feeder Returns," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49486, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea09:49486
    DOI: 10.22004/ag.econ.49486
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    File URL: https://ageconsearch.umn.edu/record/49486/files/611129.pdf
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    References listed on IDEAS

    as
    1. Aadland, David, 2004. "Cattle cycles, heterogeneous expectations and the age distribution of capital," Journal of Economic Dynamics and Control, Elsevier, vol. 28(10), pages 1977-2002, September.
    2. Randal R. Rucker & Oscar R. Burt & Jeffrey T. LaFrance, 1984. "An Econometric Model of Cattle Inventories," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(2), pages 131-144.
    3. David Aadland, "undated". "The economics of cattle supply," Working Papers 2000-11, Utah State University, Department of Economics.
    4. Baak, Saang Joon, 1999. "Tests for bounded rationality with a linear dynamic model distorted by heterogeneous expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 23(9-10), pages 1517-1543, September.
    5. Sherwin Rosen, 1987. "Dynamic Animal Economics," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(3), pages 547-557.
    6. Dabin Wang & William G. Tomek, 2007. "Commodity Prices and Unit Root Tests," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 873-889.
    7. Aadland, David, 2002. "Cattle Cycles, Expectations And The Age Distribution Of Capital," 2002 Annual meeting, July 28-31, Long Beach, CA 19795, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    Cited by:

    1. Riley, John Michael & Williams, Brian R., 2013. "Cow-Calf Industry Expansion on the Horizon? Market Signals vs. Outside Factors," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 143044, Southern Agricultural Economics Association.

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