Low prices result from supplies that are large relative to existing demand. Widely varying prices, both above and below the market price level, result from many factors directly affecting price discovery. Price determination is the interaction of the broad forces of supply and demand, which determine the market price level. Imported lamb and domestically produced lamb, minus exports, combine to form the total supply of lamb available to U.S. consumers. Price discovery is the process of buyers and sellers arriving at a transaction price for a given quality and quantity of a product at a given time and place.
Price discovery begins with the market price level.
Because buyers and sellers discover prices on the basis of uncertain expectations, transaction prices fluctuate around the market price level. This fluctuation is attributable to the quantity and quality of the commodity brought to market, the time and place of the transaction, and the number of potential buyers and sellers present. In this study, wholesale lamb prices were positively related to slaughter lamb prices. Wholesale lamb prices are used by lamb packers as a starting point in the pricing process for slaughter lambs and represent an important component in the profit equation for packers. Thus, slaughter lamb prices tend to rise or fall as boxed lamb prices rise or fall.