Projection of the cattle arroba price in the state of São Paulo using dynamic linear models

Abstract:

Beef cattle in Brazil has become increasingly competitive, as the country is the second-largest producer and the largest exporter of beef in the world. It is relevant to analyze the behavior of the price of the cattle arroba in this sector, as well as the factors that influence it, considering that such knowledge helps in the strategic planning and decision-making of the parties involved. This study addresses the verification of the behavior of arroba prices in the state of São Paulo from January 2005 to January 2020 to estimate the projection of the trend of this indicator inquiring the use of the Dynamic Linear Models (DLM). In addition, market variables were previously selected based on the existing literature for the analysis of their correlation with the value of the arroba. There was a strong positive correlation with the price of the calf, the exchange ratio of fat cattle/lean cattle, the slaughter of cattle, and the importation of Brazilian meat by China. There was also a moderate positive correlation regarding the volume of beef exports by the United States and a moderate negative correlation between the arroba price in Brazilian reais and the US dollar exchange rate.

Keywords:
beef cattle; price trend; dynamic linear models