Economists have proposed several plausible explanations for observed price transmission asymmetries in commodity markets. Unfortunately, the econometric methods commonly used in such studies cannot empirically distinguish pricing behavior under the competing theories. We argue that the theories may be classified by firm responses to high- and low-frequency price cycles and use Engle's band spectrum regression to test the symmetry of high- and low-frequency cycles in weekly pork prices. The findings indicate that changes in wholesale prices are asymmetrically transmitted to retail prices in relatively low-frequency cycles, which does not support search costs and other high-frequency explanations. Conversely, wholesale pork prices asymmetrically adjust to changes in farm prices at all frequencies. Copyright 2001, Oxford University Press.

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The U.S. pork and beef sectors are rapidly moving from traditional cash markets to formal vertical linkages. In 1999, 27% of hogs and 65% of cattle were traded in the cash market and packers owned 18% of hogs and 5% of cattle; the rest were procured via marketing contracts. Contrary to popular opinion that plant efficiency is the impetus for the change, packers clearly identified quality concerns as the dominant reason for using marketing contracts or self-production. Quality standards and procurement systems to achieve them will increase in importance with the introduction of more branded pork and beef products.T he U.S. beef and pork industries are undergoing marked transitions in the ways livestock and meat products are marketed and the way price discovery occurs, stimulating reexamination of the coordination linkages selected by industry participants, and intensive state and national policy concerns and debates. Emphasis is shifting from the once dominant negotiated cash markets in cattle and hogs to long-term contracts and marketing agreements, with the pork industry rapidly becoming dominated by long-term contracts or vertical integration. A number of cattle producers have voiced concerns about "captive supplies" (marketing contracts longer than 14 days or cattle feeding by packers) for years, though the extent of contracting fed cattle is much less than in the pork industry. 1 Economists have documented lower cash market fed cattle prices associated with higher captive supplies, though the behavioral causes are still unclear

A small proportion of hogs sold to packers are priced according to their carcass value, and some producers feel that price incentives for lean hogs are inadequate. Pork carcass composition and value relationships were analyzed for a sample of 185 pork carcasses. Carcass weight, back fat thickness, and muscling index accounted for 79% of the variations in carcass value; these factors were incorporated into a standardized payoff matrix providing larger incentives for better carcasses which could be incorporated into individual packer procurement systems.