Abstract
Live cattle basis witnessed incredible volatility in recent years leading to questions of structural change and the possibility of decreased hedging effectiveness. If fundamental drivers of live cattle cash and futures prices have changed, cattle feeders and beef packers alike may need to re-evaluate their business, marketing, and hedging plans. Structural breaks can be identified and confirmed using statistical methods while the drivers of those structural breaks can be evaluated using forecast models. This research finds evidence that both live cattle basis and live cattle basis variability witnessed structural change near the beginning of 2014. Furthermore, results suggest that changes to the live cattle supply chain including regional cash market thinness and a trend towards higher quality beef are among the most important factors driving structural change.