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An Analysis of the Effects of Feed Ingredient Price Risk on the Selection of Minimum Cost Backgrounding Feed Rations

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  • Coffey, Brian K.

Abstract

The traditional minimum cost feed ration linear programming model is expanded to permit risk management responses to price variability associated with feeding a particular ration across time. The cost minimizing objective function also considers feed costs in a mean-variance (E-V) framework. The model is specified using NRC nutrient requirements and an historic Feedstuffs price series. A decision-maker can choose his/her optimal ration by making tradeoffs between price risk and net income. The results should provide a basis for decision tools that allow livestock producers to manage the net income risk involved in the selection of a feed ration.

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  • Coffey, Brian K., 2001. "An Analysis of the Effects of Feed Ingredient Price Risk on the Selection of Minimum Cost Backgrounding Feed Rations," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 33(2), pages 353-365, August.
    • Handle: RePEc:cup:jagaec:v:33:y:2001:i:02:p:353-365_00
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    1. Dillon, Carl R., 1992. "Microeconomic Effects Of Reduced Yield Variability Cultivars Of Soybeans And Wheat," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 24(1), pages 1-13, July.
    2. Anderson, Jock R. & Dillon, John L. & Hardaker, Brian, 1977. "Agricultural Decision Analysis," Monographs: Applied Economics, AgEcon Search, number 288652, July.
    3. Anderson, Jock R. & Feder, Gershon, 2007. "Agricultural Extension," Handbook of Agricultural Economics, in: Robert Evenson & Prabhu Pingali (ed.), Handbook of Agricultural Economics, edition 1, volume 3, chapter 44, pages 2343-2378, Elsevier.
    4. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-430, June.
    5. Prevatt, J. Walter & Melton, Bryan E. & Spreen, Thomas H. & Mathis, William Kary, 1978. "The Economics Of Carcass Beef Production: An Appraisal Of Florida'S Feedlot Potential," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 10(2), pages 1-7, December.
    6. Dillon, Carl R., 1992. "Microeconomic Effects Of Reduced Yield Variability Cultivars Of Soybeans And Wheat," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 24(1), pages 121-133, July.
    7. George J. Stigler, 1945. "The Cost of Subsistence," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 27(2), pages 303-314.
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    Cited by:

    1. Schmit, Todd M. & Verteramo, Leslie & Tomek, William G., 2009. "Implications of Growing Biofuel Demands on Northeast Livestock Feed Costs," Agricultural and Resource Economics Review, Cambridge University Press, vol. 38(2), pages 200-212, October.
    2. Salim, Juma K. & Dillon, Carl R. & McAllister, Jack, 2006. "Risk management on application of minimum-cost feed ration for nitrogen and phosphorus reduction on dairy farm," 2006 Annual meeting, July 23-26, Long Beach, CA 21274, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Schmit, Todd M. & Verteramo, Leslie & Tomek, William G., 2007. "Biofuel Demands: Their Implications for Feed Prices," Working Papers 179943, Cornell University, Department of Applied Economics and Management.

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