Spatial integration of feeder cattle markets

Previous analyses of market integration often ignore the spatial aspect of economic activity. A model of imperfect competition with changed implications for pricing structures is used to analyze spatial pricing relationships between ten feeder cattle markets. The econometric model is applied to reveal price structures over a six year period, a two year period, and to identify changes in price structures corresponding with the change from physical delivery to cash settlement of feeder cattle futures contracts. The six year analysis indicates that all markets are integrated through a lagged adjustment process. The two year analysis reveals short-term patterns of price independence or nearly instantaneous price matching among some locations. The change to cash settlement corresponds with changes towards either independence or instantaneous price matching activity for the markets involved. Four high volume central plains locations act as an integrated central market which the other locations match.

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