The effect of E-coli O157:H7 on beef prices

Using an event study, we examine the impact of recalls for E. Coli O157:H7 on wholesale and farm-level beef prices. Prices for boneless beef, a high-volume product primarily used for processing into ground beef, react negatively to recalls, suggesting incentives exist for packing firms to adopt measures that reduce the risk of contamination. However, there is no reaction in live cattle prices and very little reaction in boxed beef prices to recall events. This suggests short-run price responses found at the wholesale level for boneless beef do not transmit back to the farm level.