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Risk and Market Participant Behavior in the U.S. Slaughter Cattle Market

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  • Feuz, Dillon M.
  • Fausti, Scott W.
  • Wagner, John J.

Abstract

Incomplete information generates uncertainty for market participants in the slaughter-cattle market. Buyer and seller behavior in the presence of that uncertainty is examined. Statistically significant risk premiums are charged by packers when buying slaughter cattle on either a live- or dressed-weight basis compared to buying on a grade-and-yield basis. Pratt-Arrow risk-aversion coefficients are calculated for buyers and these remain constant over all marketing methods. Sellers market cattle under all three marketing methods, suggesting producers' attitudes toward risk (risk-aversion coefficients) vary.
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Suggested Citation

  • Feuz, Dillon M. & Fausti, Scott W. & Wagner, John J., 1994. "Risk and Market Participant Behavior in the U.S. Slaughter Cattle Market," Economics Staff Papers 232233, South Dakota State University, Department of Economics.
    • Handle: RePEc:ags:sdsusp:232233
    DOI: 10.22004/ag.econ.232233
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    Cited by:

    1. Ward, Clement E., 2005. "Supply Effects on Price Discovery and Pricing Choice for Fed Cattle," 2005 Conference, April 18-19, 2005, St. Louis, Missouri 19034, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    2. 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.
    3. Fausti, Scott W. & Wang, Gerald & Diersen, Matthew A. & Qasmi, Bashir A., 2012. "Pricing Fed Cattle on a Grid: An Analysis of the Incentive Mechanism over Time," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119670, Southern Agricultural Economics Association.
    4. Ward, Clement E., 2005. "Factors Influencing the Extent of Grid Pricing of Fed Cattle," 2005 Conference, April 18-19, 2005, St. Louis, Missouri 19035, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    5. Reagan, Tyler J. & Anderson, David P. & Ishdorj, Ariun, 2016. "An Economic Analysis of the Price Discount for Over Thirty Months of Age Cattle," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 229754, Southern Agricultural Economics Association.
    6. Steiner, Bodo E., 2007. "Formal beef alliances and alignment challenges: issues in contracting, pricing and quality," Project Report Series 7709, University of Alberta, Department of Resource Economics and Environmental Sociology.
    7. Fausti, Scott W. & Feuz, Dillon M. & Wagner, John J., 1998. "Value Based Marketing For Fed Cattle: A Discussion Of The Issues," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 1(1), pages 1-18.
    8. Hogan, Robert J., Jr. & Carlberg, Jared G. & Ward, Clement E. & Peel, Derrell S., 2012. "Factors Affecting Quality Grade Discounts for Fed Cattle," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119814, Southern Agricultural Economics Association.
    9. Scott W. Fausti & Zhiguang Wang & Bashir A. Qasmi & Matthew A. Diersen, 2014. "Risk and marketing behavior: pricing fed cattle on a grid," Agricultural Economics, International Association of Agricultural Economists, vol. 45(5), pages 601-612, September.
    10. Feuz, Dillon M., 1999. "Market Signals In Value Based Pricing Premiums And Discounts," 1999 Annual Meeting, July 11-14, 1999, Fargo, ND 35739, Western Agricultural Economics Association.
    11. Ward, Clement E. & Carlberg, Jared G. & Brocklebank, Andrea, 2007. "Comparing Canadian and U.S. Cattle Feeding Pricing Practices and Perceptions of Pricing Issues," CAFRI: Current Agriculture, Food and Resource Issues, Canadian Agricultural Economics Society, issue 8, pages 1-12, December.
    12. McDonald, R. Allen & Schroeder, Ted C., 2000. "Determinants Of Profit Variability In Fed Cattle Grid Pricing," 2000 Annual Meeting, June 29-July 1, 2000, Vancouver, British Columbia 36514, Western Agricultural Economics Association.
    13. Feuz, Dillon M., 1997. "Live, In-the-Beef, or Formula: Is There a "Best" Method for Selling Fed Cattle?," 1997 Annual Meeting, July 13-16, 1997, Reno\ Sparks, Nevada 35795, Western Agricultural Economics Association.
    14. Fausti, Scott W. & Qasmi, Bashir A., 2002. "Does The Producer Have An Incentive To Sell Fed Cattle On A Grid?," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 5(1), pages 1-17.
    15. Bodo E. Steiner, 2017. "A phenomenon-driven approach to the study of value creation and organizational design issues in agri-business value chains," Economia agro-alimentare, FrancoAngeli Editore, vol. 19(1), pages 89-118.
    16. Ardian Harri & John Michael Riley & John D. Anderson & Keith H. Coble, 2009. "Managing economic risk in value‐based marketing of fed cattle," Agricultural Economics, International Association of Agricultural Economists, vol. 40(3), pages 295-306, May.
    17. Fausti, Scott W. & Qasmi, Bashir A. & Diersen, Matthew A & Adamson, Bill, 2014. "Grid Valuation of Beef Carcass Quality: Market Power and Market Trends," Economics Staff Papers 171423, South Dakota State University, Department of Economics.

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    Livestock Production/Industries; Marketing;

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