OPTIMAL MARKETING DECISIONS FOR FEEDER CATTLE UNDER PRICE AND PRODUCTION RISK

In many parts of the U.S., beef cattle production is a large sector of the agricultural economy, yet few of the cattle are stockered; instead the production is focused on cow-calf operations only. Restricting their operation to only the first phase of beef production may be limiting the cattle owners' profit potential. This paper examines the opportunities for operators to earn additional profit from stockering cattle. Using a representative risk-averse producer, a decision set with seven possible marketing strategies is elevated for the optimal decision in a Bayesian framework which allows for price and production risk. We find that in many instances retaining the cattle for stockering is a superior decision when done in conjunction with specific hedging strategies utilizing options and futures contracts.


Issue Date:
2001-12
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/15442
Published in:
Journal of Agricultural and Applied Economics, Volume 33, Number 3
Page range:
431-443
Total Pages:
13
JEL Codes:
C6; D2; Q1




 Record created 2017-04-01, last modified 2017-04-04

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