The COVID-19 Pandemic and Dynamics of Price Adjustment in the U.S. Beef Sector

Abstract

This research investigates the impact of the COVID-19 pandemic on the dynamics of vertical price transmission in the U.S. beef industry using monthly farm, wholesale, and retail prices for the period 1970–2021. Contemporary time-series techniques and historical decomposition graphs were used to test for possible asymmetries and structural breaks in the price transmission across the beef supply chain. The results show that the impact of COVID-19 has been uneven across the beef marketing channel, with consumers and farmers sharing the burden of the shock. Historical decomposition graphs demonstrated that the COVID-19 pandemic caused consumers paying higher prices, but farmers receiving lower prices than their predicted values. Hence, both consumers and farmers in the U.S. beef supply chain were adversely affected by the COVID-19 pandemic. Furthermore, the results detected asymmetric price adjustments along the U.S. beef supply chain, both in speeds and magnitudes, with the wholesale prices being more flexible, adjusting quicker than farm and retail prices. The results indicated that the U.S. beef markets were resilient enough to absorb the shock and return to their pre-shock patterns in 4 to 6 months. These results have welfare and policy implications for the U.S. beef industry.