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Optimal Marketing Decisions for Feeder Cattle under Price and Production Risk

Published online by Cambridge University Press:  19 March 2018

Xuecai Wang ,
Jeffrey H. Dorfman ,
John McKissick  and
Steven C. Turner
Xuecai Wang
Affiliation:
The University of Georgia and is now an at American Express
Jeffrey H. Dorfman
Affiliation:
Department of Agricultural & Applied Economics at The University of Georgia, Athens GA 30602-7509
John McKissick
Affiliation:
Department of Agricultural & Applied Economics at The University of Georgia, Athens GA 30602-7509
Steven C. Turner
Affiliation:
Department of Agricultural & Applied Economics at The University of Georgia, Athens GA 30602-7509
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Abstract

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 evaluated 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.

Keywords

cattledecision scienceestimation riskmarketingC6D2Q1
Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 33 , Issue 3 , December 2001 , pp. 431 - 443
Copyright
Copyright © Southern Agricultural Economics Association 2001

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