1 A Case Study of Livestock Prices in Nicaragua

Growing at an annual rate of 3.7%, the Latin American1 livestock sector surpasses the average global livestock growth rate of 2.1% (FAO, 2020a) and has become the leading region for beef and poultry exports worldwide (FAO, 2020a). We conduct a case study of livestock prices in Nicaragua, the leading meat producing country in Central America. Nicaragua’s livestock production is non- intensive and is expected to exhibit a growth rate of 24% between 2017 and 2018 (NCB, 2017). Using data on futures on feeder cattle prices from the Chicago Mercantile Exchange Group (CME) supplemented with data on 2,520 sales transactions from 99 auctions from 2017 to 2018 from the Nicaraguan Cattle Auction (NCA), this study conducts a hedonic price analysis for cattle auctioned in Nicaragua. In particular, the study empirically identifies factors affecting price differentials for cattle and examines its correlation with the futures market. Our results showed that weight, lot size (head), and class are all statistically significant factors impacting livestock auction prices while their correlation with the futures market is significant for six out of the eight futures variables corresponding to the contract months at the CME. 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.