Definition of Cattle Procurement Markets

Market definitions are important for measuring concentration and assessing its effects on competition. For example, there is potential for local price manipulation by one or a few buyers if markets are local and cattle cannot be transported easily and cheaply to take advantage of better prices in other regions. Three research teams worked n this project. They used three different approaches and arrived at similar conclusions, that fed cattle procurement markets behave as if cattle are traded nationally.

The results showed the majority of cattle price differences among regions were well below transportation costs, suggesting all U.S. fed-cattle markets are closely linked. Packers' procurement areas showed considerable overlap, so that no region could be isolated as a separate geographic market. Price adjustments occurred vary rapidly across regions, with one-third of price adjustments being made within one day. Price relationships were especially strong among plants in Nebraska, Colorado, Kansas, and Texas. Evidence suggested that Kansas and Nebraska are the center of price discovery.

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Part 2, Figures 1 and 2

Part 3, Figures 1 to 6


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