Effects of Alternative Marketing Arrangements on the Spot Market Price Distribution in the U.S. Hog Market
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We propose a model that elucidates the two channels through which alternative marketing
arrangements affect spot price in livestock markets. The direct effect works through their effect
on demand and supply. The indirect effect works through spot price volatility, which has been
ignored in the literature. We then estimate a dynamic model with data from the U.S. hog market
to test our model implications and quantify the two effects. We find increases in the use of AMAs
increase spot price volatility and decrease spot price level. The short-run effects are small but the
long-run effects are nontrivial.