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Expectations of Cattle Feeding Investors in Feeder Cattle Placements

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Author Info

  • Kastens, Terry L.
  • Schroeder, Ted C.

Abstract

Cattle feeders appear irrational when they place cattle on feed when projected profits are negative. Long futures positions appear to offer superior returns to cattle feeding investment. Cattle feeder behavior suggests that they believe a downward bias in live cattle futures persists and that cattle feeders use different information than the live cattle futures market price when making placement decisions. This paper examines feeder cattle placement determinants and compares performance of expected hedgeable profits with past actual profits in explaining feeder cattle' placements. Past actual profits are found to be more important placement determinants than expected profits based upon the live cattle futures market, even though hedgeable profits provide superior forecasts of future profits.

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File URL: http://purl.umn.edu/118159
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Bibliographic Info

Paper provided by Kansas State University, Department of Agricultural Economics in its series Staff Papers with number 118159.

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Date of creation: Jul 1993
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Handle: RePEc:ags:ksaesp:118159

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Postal: 342 Waters Hall, Manhattan, Kansas 66506
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Web page: http://www.agecon.ksu.edu/
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Keywords: Livestock Production/Industries;

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  1. Bradshaw, Girard W. & Orden, David, 1990. "Granger Causality From The Exchange Rate To Agricultural Prices And Export Sales," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 15(01), July.
  2. Ashley, R & Granger, C W J & Schmalensee, R, 1980. "Advertising and Aggregate Consumption: An Analysis of Causality," Econometrica, Econometric Society, vol. 48(5), pages 1149-67, July.
  3. Brorsen, B. Wade & Coulibaly, Nouhoun & Richter, Francisca G.-C. & Bailey, DeeVon, 2001. "Feeder Cattle Price Slides," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(01), July.
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