A Hedonic Analysis of Cattle Prices in Nicaragua

Document Type

Thesis

Degree Name

Master of Science (MS)

Department

Ag Science and Natural Resources

Date of Award

Summer 2021

Abstract

Growing at an annual rate of 3.7%, the Latin American livestock sector has surpassed the average global livestock growth rate of 2.1% and has become the leading region for beef and poultry exports worldwide (Food and Agriculture Organization [FAO], 2020a). In this investigation, a case study of cattle prices in Nicaragua, the leading meat-producing country in Central America, is conducted. Nicaragua’s cattle production is non-intensive and exhibited a growth rate of 24% between 2017 and 2018 (Nicaraguan Central Bank [NCB], 2018). Using data on futures on feeder cattle prices from the Chicago Mercantile Exchange Group (CME) supplemented with data on 2,520 sales transactions from 99 auctions from 2017 to 2018 from the Nicaraguan Cattle Auction (NCA), this study conducts a hedonic price analysis for cattle auctioned in Nicaragua. While in a previous study, we used cash price as the independent variable, following Trapp and Eilrich (1991), we used a basis approach in the present study to further improve the regression model. A basis model has been found to be a better risk management tool as variations between cash prices and futures prices are reduced. In particular, the study empirically identifies factors affecting price differentials for cattle. The estimation results show that weight, lot size, and sex are among statistically significant factors impacting cattle auction prices. The results of the study are of importance to buyers and sellers of cattle in their decision-making process and help them understand information from the futures market to predict price differences and reduce price risk and uncertainty.

Advisor

Jose A. Lopez

Subject Categories

Agriculture | Animal Sciences | Life Sciences

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