Risk, Arbitrage, and Spatial Price Relationships: Insights from China’s Hog Market under the African Swine Fever

Co-authors: Michael S. Delgado and Meilin Ma

by the 2018 outbreak of African Swine Fever (ASF) in China as a natural

experiment to study spatial mechanisms behind the dynamics of market

integration. With a unique dataset of weekly provincial hog prices, we employ a

novel spatial network model to estimate the strength of price co-movement

across provinces pre and post the ban. Results indicate that, in the highly

integrated national market prior to the ban, longer geographical distances

between two provinces did not weaken the strength of their price linkage. The

ban broken down spatial integration. Longer distances became a significant

obstacle to spatial price linkage in the post-ban periods, implying faster

re-integration of hog prices between proximate provinces than remote ones. The

negative effect of distance can be rationalized by the interplay between

arbitrage opportunities and imperfect information. Our findings highlight information

transparency as a key to market integration post shipping bans used to curb

animal pandemics like ASF.

If you are interested in joining the seminar, please send an email to Hedda Werkman.