Modeling Farm-Retail Price Spread in the U.S. Pork Industry

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Title: Modeling Farm-Retail Price Spread in the U.S. Pork Industry
Author: Shen, Zhangxin
Advisors: Michael K. Wohlgenant, Committee Chair
Howard D. Bondell, Committee Co-Chair
Kelly D. Zering, Committee Member
Abstract: The farm-retail price spread is the difference between the retail price of a product and its farm value. It changes with changes in factor prices, the efficiency of providing services, and the quantity and quality of services embodied in the final product. A model was derived by Box-Cox transform base on the relative price spread mode for the U.S. pork industry. The new model analyses the determinant of margins more accurately. The results indicate the log of farm-retail price spread is significantly and positively related to increases in log of retail price and log of quantity of farm input. And the relationship between the price spread and industry costs is indeterminate. The results point to the strong possibility of spurious correlation between the price spread and concentration variables. It suggests other possibly unobserved variables correlated with trend are spuriously indicating concentration ratio, has a significant effect on the price spread. Another major implication of this study is that variables used on the regression need to be detrended in estimation.
Date: 2010-04-27
Degree: MA
Discipline: Economics

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