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The Role of Price Risk Management in Mitigating Fed Cattle Profit Exposure

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  • Belasco, Eric J.

Abstract

This study identifies the amount and origin of risk in cattle feedlot operations through the use of simulation techniques. Ex ante profit risks are evaluated under scenarios with varying levels of price protection through the use of forward pricing. An empirical probability density function is simulated to capture the mean and variability in prices and cattle production yields within a specified profit under difference assumptions regarding the relative importance of production risk and price risk in overall cattle feeding profits.

Suggested Citation

  • Belasco, Eric J., 2008. "The Role of Price Risk Management in Mitigating Fed Cattle Profit Exposure," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 33(3), December.
  • Handle: RePEc:ags:jlaare:46563
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    File URL: http://purl.umn.edu/46563
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    References listed on IDEAS

    as
    1. Chad E. Hart & Bruce A. Babcock & Dermot J. Hayes, 2001. "Livestock Revenue Insurance," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 21(6), pages 553-580, June.
    2. David C. Hall & Thomas O. Knight & Keith H. Coble & Alan E. Baquet & George F. Patrick, 2003. "Analysis of Beef Producers' Risk Management Perceptions and Desire for Further Risk Management Education," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 25(2), pages 430-448.
    3. Eric J. Belasco & Sujit K. Ghosh & Barry K. Goodwin, 2007. "A Multivariate Evaluation of Ex ante Risks Associated with Fed Cattle Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(2), pages 431-443.
    4. David A. Hennessy & Bruce A. Babcock & Dermot J. Hayes, 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1024-1034.
    5. repec:oup:revage:v:25:y:2003:i:2:p:430-448. is not listed on IDEAS
    6. Nicholas E. Piggott & Thomas L. Marsh, 2004. "Does Food Safety Information Impact U.S. Meat Demand?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 154-174.
    7. Barry K. Goodwin & Monte L. Vandeveer & John L. Deal, 2004. "An Empirical Analysis of Acreage Effects of Participation in the Federal Crop Insurance Program," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(4), pages 1058-1077.
    8. Langemeier, Michael R. & Schroeder, Ted C. & Mintert, James R., 1992. "Determinants Of Cattle Finishing Profitability," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 24(02), December.
    9. Lusk, Jayson L., 2007. "Economic Value of Selecting and Marketing Cattle by Leptin Genotype," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 32(02), August.
    10. DeVuyst, Eric A. & Bullinger, Jared R. & Bauer, Marc L. & Berg, Paul T. & Larson, Daniel M., 2007. "An Economic Analysis of Genetic Information: Leptin Genotyping in Fed Cattle," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 32(02), August.
    11. Joseph W. Glauber, 2004. "Crop Insurance Reconsidered," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1179-1195.
    12. David A. Hennessy & Bruce A. Babcock & Dermot J. Hayes, 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1024-1034.
    13. Jean-Paul Chavas & Kwansoo Kim, 2004. "A Heteroskedastic Multivariate Tobit Analysis of Price Dynamics in the Presence of Price Floors," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 576-593.
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