Analysis of Marketing Margins under Food Recalls and BSE Outbreaks in the U.S. Beef Industry

It is generally observed that whenever there are cases of disease outbreaks or food recalls, there is a concomitant decline in commodity prices. However, it is still not clear what happens to price spreads among affected agents in the marketing chain. To shed light on this issue, we estimate the collective impact of Bovine Spongiform Encephalopathy (BSE) and food recalls on marketing margins associated with the U.S. beef industry over time. In previous research, the effects of these variables on the market demand of meat were estimated separately. By including these variables together in the same model specification we avoid the possibility of confounding their effects, and we are in position to obtain more precise estimates of elasticities of price transmission along the marketing chain