Price Discovery in the Egg Industry

Formula pricing of eggs is typically based on quotations issued by Urner Barry Publications, and egg producers worry that the quotes are systematically lower than equilibrium levels. Egg Clearinghouse, Inc. (ECI) provides a public forum for cash trading, intended to facilitate price discovery. Evidence from 1994-95 does not suggest that Umer Barry understates producer level prices on average. Granger causality tests indicate a feedback relationship between the Urner Barry quotes and ECI prices, with ECI leading during price upswings. Lead times appear to have fallen since the late 1970s and early 1980s, confirming earlier predictions regarding market efficiency. Most eggs (90-95%) are produced under contract trading on ECI, intended to influence the Urner or within integrated operations (ECI 1995), and Barry quotes, threatened to disrupt ECI's intended shell egg transactions from the producer level function as a price discovery mechanism (ECI through the retail level are typically priced by for- 1995). A second Granger causality analysis by mula using the Thursday wholesale-level price Schrader, Bessler, and Preston (1985) concluded quotations published in Urner Barry's Price- that during the period 1979-82 the direction of Current. The difficulty of discovering equilibrium causality had reversed: Urer Barry was a leadin