Location and distance effects on western calf and yearling prices

Some long-standing concerns regarding cattle markets in the western United States are addressed in this study using twelve years of data from video auction sales across the West. Western ranchers receive lower prices for cattle relative to prices received by ranchers in the Midwest. We show that the price received by ranchers in western states includes a discount fixed per mile from a central market in the Midwest. That implies a competitive, FOB pricing structure may be operating in cattle markets, however different distance discounts in calf and yearling market segments, plus the presence of additional regional price discounts in western states, indicate conditions typical of an integrated market in which buyers favor sellers in the Midwest over those in the West. The average amount of location and distance discounts are both reported for multiple market regions. Some implications of those results are drawn concerning the market structure of the western cattle market and its local components.