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Risk and the Economic Incentive to Retain Ownership of Steer Calves

Author

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  • Fausti, Scott W.
  • Johnson, Brad
  • Epperson, William
  • Grathwohl, Nancy

Abstract

Retained ownership of steer calves is an investment decision for cow/calf producers. Data collected over a three-year period on 845 steer calves reveals that retaining ownership of steer calves is, on average, profitable. Systematic and unsystematic risks associated with retaining ownership of steer calves are identified. Empirical results indicate that unsystematic risk account for 67% of the variability in the rate of return to retained ownership in this study. For seventy-five producers who entered weaned calves into a university sponsored ranch to rail program, the empirical evidence suggests that retaining ownership is a riskier investment decision than ascertained in the earlier literature. We conclude that the lack of enthusiasm for retaining ownership by cow/calf producers may be the result of the level of risk associated with retaining ownership rather than producers being too risk averse as asserted in the literature.

Suggested Citation

  • Fausti, Scott W. & Johnson, Brad & Epperson, William & Grathwohl, Nancy, 2003. "Risk and the Economic Incentive to Retain Ownership of Steer Calves," Economics Staff Papers 32023, South Dakota State University, Department of Economics.
    • Handle: RePEc:ags:sdsusp:32023
    DOI: 10.22004/ag.econ.32023
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    References listed on IDEAS

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    Cited by:

    1. Fausti, Scott & Diersen, Matthew & Qasmi, Bashir & Adamson, Bill, 2015. "The Influence of Market Power and Market Trends on Grid Market Signals," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(1), pages 1-12.
    2. Tang, Minfeng & Lewis, Karen E. & Griffith, Andrew P. & Boyer, Christopher N., 2016. "Identifying Factors that Impact Returns to Retained Ownership of Cattle," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 229766, Southern Agricultural Economics Association.
    3. 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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    Keywords

    Risk and Uncertainty;

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