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Risk Sharing in Custom Cattle Feeding

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  • Mark R. Weimar
  • Arne Hallam

Abstract

A simulation model is used to evaluate the risks and returns to feedlot operators and cattle owners in the upper Midwest that occur with alternative types of custom cattle feeding contracts. Historical price data were combined with seasonal performance data to analyze the seasonal incentives for different risk-sharing arrangements. Seasonal returns varied significantly both as to mean and variance and point out the need for seasonally varying contract terms. Feedlot owners are significantly better off with yardage fee contracts as opposed to cost-of-gain contracts in terms of return variance, whereas cattle owners are only slightly better off with guaranteed cost-of-grain contracts.

Suggested Citation

  • Mark R. Weimar & Arne Hallam, 1990. "Risk Sharing in Custom Cattle Feeding," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 12(2), pages 279-291.
    • Handle: RePEc:oup:revage:v:12:y:1990:i:2:p:279-291.
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    File URL: http://hdl.handle.net/10.1093/aepp/12.2.279
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    Cited by:

    1. Unterschultz, James R., 2000. "New Instruments For Co-Ordination And Risk Sharing Within The Canadian Beef Industry," Project Report Series 24046, University of Alberta, Department of Resource Economics and Environmental Sociology.
    2. Langemeier, Michael R. & Schroeder, Ted C. & Mintert, James R., 1992. "Determinants Of Cattle Finishing Profitability," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 24(2), pages 1-7, December.
    3. Hudson, William T. & Purcell, Wayne D., 2001. "Risk Sharing and Compensation Guides for Managers and Members of Verticle Beef Alliances," Staff Papers 232386, Virginia Polytechnic Institute and State University, Department of Agricultural and Applied Economics.

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