Regional Price Dynamics and Market Integration in the U.S. Beef Industry: An Econometric Analysis

TL;DR

This study examines price integration in the U.S. beef industry, revealing partial market convergence and regional differences, highlighting structural frictions that impede full market unification.

Contribution

It provides an econometric analysis of regional price dynamics, demonstrating partial Law of One Price compliance and regional asymmetries in market integration.

Findings

Regional prices are integrated of order one.

Partial Law of One Price compliance in Northeast and West.

Southern prices are sensitive to exogenous shocks.

Abstract

The United States, a leading global producer and consumer of beef, continues to face substantial challenges in achieving price harmonization across its regional markets. This paper evaluates the validity of the Law of One Price (LOP) in the U.S. beef industry and investigates causal relationships among regional price dynamics. Through a series of econometric tests, we establish that regional price series are integrated of order one, displaying non-stationarity in levels and stationarity in first differences. The analysis reveals partial LOP compliance in the Northeast and West, while full convergence remains elusive at the national level. Although no region demonstrates persistent price leadership, Southern prices appear particularly sensitive to exogenous shocks. These findings reflect asymmetrical integration across U.S. beef markets and suggest the presence of structural frictions that hinder complete market unification.