Estimating Structural Changes in the Vertical Price Relationships in U.S. Beef and Pork Markets

This paper examines structural breaks in the vertical price relationships in U.S. beef/cattleand pork/hog sectors using monthly data of the past 40 years. A major methodologicalissue addressed is how to estimate price relationships when data contain intermittentstructural breaks with unknown break dates. The adopted procedures endogenously searchfor structural break dates while explicitly accounting for this search in statistical inferences.Four breaks for the beef/cattle price relationship and three breaks for the pork/hogprice relationship are identified. The estimation results further confirm the importance ofallowing for structural breaks in the analysis of vertical price relationships.