MILWAUKEE – In the new article “Beef Price Spread Relationship with Processing Capacity Utilization” published in the open access Journal of the Agricultural and Applied Economics Association, Charles Martinez, Pengzhen Li, Christopher Boyer, and Edward Yu from the University of Tennessee, along with Joshua Maples from Mississippi State University, investigate the dynamic relationship between industry–level weekly operational slaughter capacity utilization with the live cattle to box beef price spread.
They find that an increase in the previous week’s price spread positively impacts national Saturday slaughter capacity utilization for most of the time series analyzed, which suggests Saturday slaughter is more than a “catch up” day of processing but packers’ appear to respond to a higher price spread by processing more beef.
The authors say, “We find bidirectional causality between weekly slaughter capacity utilization, Saturday slaughter capacity utilization, and the live cattle to box beef price spread over the entire study period. However, additional analysis indicates these causal relationships depend on the price spread. This study does not find statistical evidence that changes in weekly, or Saturday slaughter capacity utilization impacts the price spread.“
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