Mandatory Price Reporting, Market Efficiency, and Price Discovery in Livestock Markets

Mathews, Kenneth H.,, Wade Brorsen, William F. Hahn, Carlos Arnade and Erik Dohlman

No 404248, Miscellaneous Publications from United States Department of Agriculture, Economic Research Service

Abstract: As the use of alternative marketing arrangements (AMAs) such as forward contracts and formula pricing has expanded in livestock markets since the early 1990s, and negotiated cash markets have become less commonly used to arrive at transaction prices, questions about price discovery and market efficiency have arisen. Congress passed the Livestock Mandatory Reporting Act (LMRA) in 1999 in response to concerns about a lack of public disclosure regarding AMAs, as well as concerns about concentration in the meat packing industry. The LMRA introduced mandatory price reporting (LMR) of most livestock transactions to improve the flow of transaction information in the market place and enhance price discovery, and to replace the previous system (which had relied on voluntary reporting from cash market transactions). Renewed and amended in 2005 and 2010, the LMRA is up for renewal again in 2015. This report analyzes livestock market price behavior and price discovery before and after implementation of LMRA, and finds that the increased flow of market information with LMR better informs the broader market. Analyses also indicate that futures and cash prices for hogs respond and adjust to new information (market efficiency) better in the LMR era, with an increased role for cash markets in price discovery.

Keywords: Agricultural and Food Policy; Demand and Price Analysis; Livestock Production/Industries; Marketing; Research Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 51
Date: 2015-09
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uersmp:404248

DOI: 10.22004/ag.econ.404248

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