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Cattle Feeder Behavior And Feeder Cattle Placements

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

Cattle feeders appear irrational when they place cattle on feed when projected profit is 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 expectations than the live cattle futures market price when making placement decisions. This study examines feeder cattle placement determinants, comparing performance of expected hedgeable profit with past actual profit in explaining feeder cattle placements. Past actual profit is a more important placement determinant than expected profit based upon the live cattle futures market, even though hedgeable profit provides a superior forecast of future profit. In addition, potential deterrents to cattle feeders'Â’ use of futures as a substitute for cattle ownership are discussed.

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File URL: http://purl.umn.edu/30754
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Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

Volume (Year): 19 (1994)
Issue (Month): 02 (December)
Pages:

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Handle: RePEc:ags:jlaare:30754
Contact details of provider: Web page: http://waeaonline.org/

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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. 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.
  3. 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.
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