Beef safety shocks and dynamics of vertical price adjustment: The case of BSE discovery in the U.S. beef sector

Abstract This article addresses the dynamic impact of the 2003 Bovine Spongiform Encephalopathy discovery on the U.S. beef sector. Time series analysis and historical decomposition with weekly feedlot, wholesale, and retail beef price series is used to address the dynamics of price adjustment and causality along the U.S. beef marketing channel. The results show price transmission is bidirectional, determined through interaction between the different stages, and price adjustment is asymmetric with respect to both speed and magnitude. The results reveal a differential impact of the exogenous shock on producers and retailers, which leads to widening of price margins and points to imperfect price transmission, specifically at the retail level, with consequences for the efficiency and equity of the marketing channel. EconLit citations: Q11, Q13. © 2007 Wiley Periodicals, Inc. Agribusiness 23: 333–348, 2007.