The impact of COVID-19 on price transmission and price volatility in the Canadian beef supply chain

Abstract

The COVID-19 pandemic resulted in disruptions to the Canadian meat and livestock markets. While prices initially decreased, the shutdowns of beef packing plants led to a large reduction in the supply of beef and a corresponding increase in the wholesale price with ramifications along the entire supply chain. This study examines the effect of COVID-19 on price transmission and price volatility in the Canadian beef supply chain using monthly farmgate, wholesale, and retail price data covering the period from July 2005 to February 2022. We find evidence indicating that COVID-19 affected long-run price transmission from farmgate and wholesale markets to the retail market. Specifically, we find that the pandemic resulted in a 94.42 and 81.48% decrease in price transmission from the farmgate and wholesale market, respectively, to the retail market, indicating that higher prices at the wholesale level were not being passed on to consumers to the same extent. In the short run, we find asymmetric price adjustments and both direct and indirect volatility spillovers among the three levels of markets, implying strong market interactions across the beef supply chain. Overall, our results suggest the resiliency of the Canadian beef sector to COVID-19 shocks.