2025, Volume 33, Paper 4
ISSN: 1883-5675

Recent Price Levelling and Price Averaging Behaviour in the Domestic Beef and Lamb Market 

Garry Griffith – School of Agriculture, Food and Ecosystem Sciences, University of Melbourne

Selwyn Heilbron – School of Agriculture, Food and Ecosystem Sciences, University of Melbourne; SG Heilbron Economics and Policy Consulting

Chinthani Rathnayake – School of Agriculture, Food and Ecosystem Sciences, University of Melbourne

Abstract

The rapid and substantial increases then decreases in prices for cattle and lamb in Australia during 2021-2023 raised concerns in the livestock industries about price transmission processes in domestic meat markets: whether and to what extent changes in farm prices for livestock are reflected in changes in retail prices of meat. These concerns relate to the economic concepts of price levelling and price averaging. In this paper price levelling and price averaging practices are examined using a recent set of quarterly Australian farm and retail prices for beef and lamb. In the estimated regression models, cost, throughput and trend variables are not significant for either meat, but a lagged dependent variable is positive and significant for beef, suggesting a conscious policy to keep the beef price differential stable. Further, on top of this general preference for stability, there is clear evidence of price levelling in both meats, where changes in the current price differential are negatively and significantly related to changes in the current farm price. However, this is only a short-term response, as in the next quarter the levelling ceases, and the price differential moves in the same direction as the farm price. This result matches previous research. There is no evidence of price averaging across beef and lamb price differentials in this data set which is different from the findings of most previous research.

Keywords: price levelling, price averaging, beef prices, lamb prices, Australia

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