The Great Recession and Vertical Price Transmission in the U.S Beef Market

This study analyses the price adjustment of the U.S beef sector using monthly prices of the farm, wholesale and retail levels for the period of 1970-2014. The objectives are to investigate both speed and magnitude of price adjustment. To this purpose, the Vector Error Correction Model (VECM) and historical decomposition graphs are applied. The results indicate that retail prices have lower speed of adjustment than wholesale prices. Also, the magnitude of price adjustment in the presence of the Great Recession shock, as an exogenous shock, is different for each level of the U.S. beef marketing chain such that wholesale prices show a higher magnitude of price adjustment toward the long-run equilibrium. Finally, it is concluded that with respect to both speed and magnitude of the price adjustment, the U.S. beef sector has asymmetric price adjustment, pointing to inefficiency of the U.S. beef supply chain. These results have welfare implications for the U.S. beef consumers and producers