Geopolitical risk, energy shocks, and the dynamics of volatility spillovers in livestock markets

Abstract This study examines the effects of macroeconomic uncertainty and market-specific shocks on the dynamics of returns and volatility in feeder cattle, live cattle, and lean hog futures markets. Additionally, the study explores whether volatility transmission varies within and across livestock production systems. We employ a VECM–Asymmetric Multivariate BEKK–GARCH(t) framework using 2,506 daily observations from 2016 to 2026 to jointly model long-run price relationships, short-run adjustment, asymmetric volatility, and cross-market transmission. Of the three parsimonious model specifications, the VIX-only model is preferred by the Bayesian and Hannan-Quinn information criteria and offers the most parsimonious representation of macroeconomic uncertainty. Diagnostic tests reveal that there is no remaining serial correlation or ARCH effects in the standardized residuals. Additionally, specification tests support the full asymmetric BEKK structure. Johansen cointegration identifies a single long-run equilibrium among the livestock markets, confirming structural integration within the system. The results reveal significant heterogeneity in volatility dynamics. Feeder and live cattle exhibit strong bidirectional volatility transmission, which is consistent with their sequential position in the beef production chain. In contrast, lean hog volatility is primarily driven by its own market dynamics. The VIX exerts selective rather than uniform effects on conditional risk. Overall, uncertainty in the livestock markets reflects market-specific persistence and structural linkages along the cattle supply chain, with implications for hedging and diversification.