Fragmentation in the U.S. Fed Cattle Market: Implications for Price Transparency and Discovery

Authors

TaraLee M. Hudson, University of Nebraska-LincolnFollow

First Advisor

Elliott J. Dennis

Date of this Version

12-2025

Document Type

Thesis

Citation

A thesis presented to the faculty of the Graduate College at the University of Nebraska in partial fulfillment of requirements for the degree of Master of Science

Major: Agricultural Economics

Under the supervision of Professor Elliott J. Dennis

Lincoln, Nebraska, December 2025

Comments

Copyright 2025, TaraLee M. Hudson. Used by permission

Abstract

The U.S. fed cattle market is one plagued by recurring stakeholder concern. Market participants frequently raise questions about the transparency of fundamental information under existing reporting frameworks, and the extent to which Private Negotiation, the dominant trading institution, effectively facilitates price discovery. Although extensive research has sought to address these issues, much of it has failed to account for the market’s increasingly fragmented structure. This thesis is comprised of three chapters that collectively examine price transparency and discovery through the lens of market fragmentation. Each chapter presents research related to the fed cattle market and is intended to stand alone as an individual paper.

Chapter 1 reviews the events and ensuing market disruptions that renewed stakeholder concern and spurred a wave of new policy and industry initiatives. It presents the results of a cross-sectional survey of Nebraska feedlot operators, examining their participation in negotiated trade, the factors shaping their bidding and acceptance decisions, and their perceptions of market thinness. The responses highlight specific topics needing further investigation, particularly the representativeness of existing transparency frameworks and alternative sources of price discovery.

The second chapter examines how institutional fragmentation in the fed cattle market limits the representativeness of current transparency frameworks, namely, Livestock Mandatory Reporting and USDA-AMS auction barn reporting. While trading institutions have evolved over time, the legislation governing market reporting has, in part, developed separately. Analysis presented in chapter 2 indicates that fed cattle auction barn marketings are larger than previously acknowledged and remain mostly unaccounted for. However, aggregating receipts across trading institutions is a standard practice in feeder cattle reporting but is not applied for fed cattle.

Chapter 3 presents a case study of the Fed Cattle Exchange (FCE), a weekly online English Auction, and evaluates its contribution to price discovery using a structural cointegration framework and empirical metrics. The results indicate that on FCE trading days, the FCE leads in immediate price discovery despite representing a small portion of daily volume. Further analysis shows that the FCE and direct trade markets are complementary in the overall discovery process, reflecting the fragmented structure of today’s fed cattle market.

Advisor: Elliott J. Dennis