RISK RESPONSE IN THE BEEF MARKETING CHANNEL - A MULTIVARIATE GENERALIZED ARCH-M APPROACH

A model of the farm-retail price spread for beef is specified under ra tional expectations, in which systematic fisk response on the part of marketing intermediaries is allowed. The three-equation structural mod el contains potentially time-varying risk terms in margin and supply e quations, which I approximate and estimate using a multivariate GARCH- in-Mean approach. The estimated model is used to infer relative fisk p remia in beef margins, and to simulate short-run equilibrium risk effe cts. Results indicate that price risk has, at times, had substantial i mpacts on farm and retail beef prices and production.