SOUTHERN JOURNAL OF AGRICULTURAL ECONOMICS DECEMBER, 1988 DYNAMIC PRICE ADJUSTMENTS BETWEEN COMMERCIAL AND PUREBRED CATTLE MARKETS

Abstract duction auction sales. Purebred bulls are also normally sold by the head rather than on aVector autoregression was utilized to in- per-pound basis as with commercial cattle vestigate dynamic relationships existing be- it tse a i th, ad cause tween prices of purebred bulls and prices of of the variation in cattle quality, no uniform slaughter steers, utility cows, feeder calves, price is established for pure-bred cattle as for and cow-calf pairs. Results suggest purebred feeder or slaughter cattle in the commercial bull prices respond most quickly to an in- markets (Wendland). crease in utility cow prices (proxy for slaughter bull prices). Feeder calf prices ex- Many "rules of thumb " have been devel-hibited the most pronounced positive effect on oped by cattleman for determining the value the price of herd sires, with a lagged response of service-age bulls, such as "the value of five which took over two years to build. calves " the bull will sire (Merrill, p. 370). In theory, it is presumed that the derived demand Key words: cattle prices, vector autoregres- for purebred bulls is related to the expected sion, price adjustments. biological performance the bull will pass on tohis offspring, the buyer's expectations of pro