IDEAS home Printed from https://ideas.repec.org/a/ags/jlaare/46563.html
   My bibliography  Save this article

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

Author

Listed:
  • 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), pages 1-17.
    • Handle: RePEc:ags:jlaare:46563
    DOI: 10.22004/ag.econ.46563
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/46563/files/Belasco.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.46563?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    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. Langemeier, Michael & Schroeder, Ted & Mintert, James, 1992. "Determinants of Cattle Finishing Profitability," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 24(2), pages 41-47, December.
    3. 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.
    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. 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.
    6. Mario Miranda & Dmitry V. Vedenov, 2001. "Innovations in Agricultural and Natural Disaster Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 650-655.
    7. Paul L. Fackler, 1991. "Modeling Interdependence: An Approach to Simulation and Elicitation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(4), pages 1091-1097.
    8. Joseph W. Glauber, 2004. "Crop Insurance Reconsidered," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1179-1195.
    9. Mario J. Miranda, 1991. "Area-Yield Crop Insurance Reconsidered," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 233-242.
    10. 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.
    11. 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.
    12. 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.
    13. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    14. 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(2), pages 1-24, August.
    15. 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(2), pages 1-15, August.
    16. Anderson, John D. & Trapp, James N., 2000. "The Dynamics of Feeder Cattle Market Responses to Corn Price Change," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 32(3), pages 493-505, December.
    17. Mark, Darrell R. & Schroeder, Ted C. & Jones, Rodney D., 2000. "Identifying Economic Risk In Cattle Feeding," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 18(3), pages 1-14.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chen, Shu-Ling & Miranda, Mario J., 2006. "Modeling Yield Distribution In High Risk Counties: Application To Texas Upland Cotton," 2006 Annual meeting, July 23-26, Long Beach, CA 21392, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Mitchell, Paul D. & Knight, Thomas O., 2008. "Economic Analysis of Supplemental Deductible Coverage as Recommended in the USDA's 2007 Farm Bill Proposal," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(01), pages 1-15, April.
    3. McKendree, Melissa G.S. & Tonsor, Glynn T. & Schulz, Lee L., 2021. "Management of Multiple Sources of Risk in Livestock Production," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 53(1), pages 75-93, February.
    4. Parcell, Joseph L. & Schaefer, Daniel & Patterson, David J. & John, Mike & Kerley, Monty S. & Haden, Kent, 2008. "Assessing the Value of Coordinated Sire Genetics in a Synchronized AI Program," 2008 Conference, April 21-22, 2008, St. Louis, Missouri 37618, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    5. Perry, William R. & Marsh, Thomas & Jones, Rodney & Sanderson, M.W. & Sargeant, J.M. & Griffin, D.D. & Smith, R.A., 2007. "Joint product management strategies for E. coli O157 and feedlot profits," Food Policy, Elsevier, vol. 32(5-6), pages 544-565.
    6. Maples, Joshua G. & Harri, Ardian & Riley, John Michael & Tack, Jesse B., 2013. "Marketing Margins and Input Price Uncertainty," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150604, Agricultural and Applied Economics Association.
    7. repec:ags:aaea22:335429 is not listed on IDEAS
    8. Mitchell, Paul D. & Knight, Thomas O., 2007. "Economic Analysis of Supplemental Deductible Coverage as Recommended in the USDA’s 2007 Farm Bill Proposal," Staff Papers 92125, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    9. Chemeris, Anna & Liu, Yong & Ker, Alan P., 2022. "Insurance subsidies, climate change, and innovation: Implications for crop yield resiliency," Food Policy, Elsevier, vol. 108(C).
    10. Janzen, Matthew & Coatney, Kalyn T. & Rivera, Daniel & Harri, Ardian & Riley, John Michael & Busby, Darrell & Groves, Matt, "undated". "Fed Cattle Marketing: A Field Experiment," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252844, Southern Agricultural Economics Association.
    11. Boyer, Christopher N. & Griffith, Andrew P., 2023. "Subsidy Rate Changes on Livestock Risk Protection for Feeder Cattle," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 48(01), January.
    12. Jørgensen, Sisse Liv & Termansen, Mette & Pascual, Unai, 2020. "Natural insurance as condition for market insurance: Climate change adaptation in agriculture," Ecological Economics, Elsevier, vol. 169(C).
    13. Cornaggia, Jess, 2013. "Does risk management matter? Evidence from the U.S. agricultural industry," Journal of Financial Economics, Elsevier, vol. 109(2), pages 419-440.
    14. Jing Yi & Henry L. Bryant & James W. Richardson, 2020. "How do premium subsidies affect crop insurance demand at different coverage levels: the case of corn," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(1), pages 5-28, January.
    15. Mutuc, Maria Erlinda M. & Rejesus, Roderick M. & Pan, Suwen & Yorobe, Jose M., 2012. "Impact Assessment of Bt Corn Adoption in the Philippines," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 44(1), pages 117-135, February.
    16. Lima Miquelluti, Daniel & Ozaki, Vitor & Miquelluti, David J., 2020. "An application of geographically weighted quantile LASSO to weather index insurance design," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304288, Agricultural and Applied Economics Association.
    17. Tangermann, Stefan, 2011. "Risk Management in Agriculture and the Future of the EU's Common Agricultural Policy," National Policies, Trade and Sustainable Development 320171, International Centre for Trade and Sustainable Development (ICTSD).
    18. Zhang, Li, 2008. "Three essays on agricultural risk and insurance," ISU General Staff Papers 2008010108000016857, Iowa State University, Department of Economics.
    19. Miao, Ruiqing & Hennessy, David A. & Feng, Hongli, 2016. "The Effects of Crop Insurance Subsidies and Sodsaver on Land-Use Change," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(2), May.
    20. Yi, Jing & Richardson, James & Bryant, Henry, 2016. "How Do Premium Subsidies Affect Crop Insurance Demand at Different Coverage Levels: the Case of Corn," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236249, Agricultural and Applied Economics Association.
    21. Phélippé-Guinvarc’H, Martial & Cordier, Jean, 2010. "An option on the average European futures prices for an efficient hog producer risk management," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 91(01).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:jlaare:46563. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/waeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.