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Cattle Feeder Behavior And Feeder Cattle Placements

Author

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

Abstract

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.

Suggested Citation

  • Kastens, Terry L. & Schroeder, Ted C., 1994. "Cattle Feeder Behavior And Feeder Cattle Placements," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(02), December.
  • Handle: RePEc:ags:jlaare:30754
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    File URL: http://purl.umn.edu/30754
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    References listed on IDEAS

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    1. 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.
    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 1149-1167, July.
    3. James S. Eales & Brian K. Engel & Robert J. Hauser & Sarahelen R. Thompson, 1990. "Grain Price Expectations of Illinois Farmers and Grain Merchandisers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 701-708.
    4. 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.
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    Cited by:

    1. Taylor, Mykel & Tonsor, Glynn & Dhuyvetter, Kevin, 2014. "Structural Change in Forward Contracting Costs for Kansas Wheat," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 39(2), August.
    2. Dhuyvetter, Kevin C. & Schroeder, Ted C. & Parcell, Joseph L., 1997. "The Effect of USDA Cattle on Feed Reports on Feeder Cattle Futures Prices," 1997 Annual Meeting, July 13-16, 1997, Reno\Sparks, Nevada 35751, Western Agricultural Economics Association.
    3. Mathews, Kenneth H., Jr. & Arnade, Carlos Anthony & Jones, Keithly G., 2008. "Derived Demand for Cattle Feeding Inputs," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 26(1).
    4. Tonsor, Glynn T., 2008. "Hedging in Presence of Market Access Risk," 2008 Conference, April 21-22, 2008, St. Louis, Missouri 37621, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

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    Keywords

    Livestock Production/Industries;

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