A Hedonic Analysis of Cattle Prices in Nicaragua

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. In 2018, Nicaragua led beef production and exports in Central America with growth rates of 24% and 16.4%, respectively. Using data on feeder cattle futures prices and on 2,520 sales transactions from 99 cattle auctions in Nicaragua from 2017 to 2018, this study conducts a hedonic price analysis using a basis approach. A basis model is considered a better risk management tool in terms of variations between cash prices and futures prices and potential endogeneity issues associated with these two variables. The study found that weight, lot size, and class are 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.