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Expected Utility Analysis of Stocker Cattle Ownership Versus Contract Grazing in the Southeast

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  • Anderson, John D.
  • Lacy, Curt
  • Forrest, Charlie S.
  • Little, Randall D.

Abstract

Stocker cattle ownership is compared to contract grazing using stochastic simulation. Returns are evaluated for both cattle owners and caretakers in contract grazing agreements. For caretakers, contract grazing is significantly less risky than cattle ownership. Slightly to moderately risk-averse caretakers could be expected to prefer some type of contract grazing to direct ownership of cattle. For cattle owners, contracting reduces risk only slightly while significantly reducing expected returns.

Suggested Citation

  • Anderson, John D. & Lacy, Curt & Forrest, Charlie S. & Little, Randall D., 2004. "Expected Utility Analysis of Stocker Cattle Ownership Versus Contract Grazing in the Southeast," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(3), pages 1-12, December.
    • Handle: RePEc:ags:joaaec:43471
    DOI: 10.22004/ag.econ.43471
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    2. McBride, William D. & Key, Nigel D., 2003. "Economic And Structural Relationships In U.S. Hog Production," Agricultural Economic Reports 33971, United States Department of Agriculture, Economic Research Service.
    3. Harrison, R. Wes & Bobst, Barry W. & Benson, Fred J. & Meyer, Lee, 1996. "Analysis Of The Risk Management Properties Of Grazing Contracts Versus Futures And Option Contracts," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 28(2), pages 1-16, December.
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    1. Mohammad Khakbazan & Hushton C. Block & John Huang & Jeff J. Colyn & Vern S. Baron & John A. Basarab & Changxi Li & Chinyere Ekine-Dzivenu, 2022. "Effects of Silage-Based Diets and Cattle Efficiency Type on Performance, Profitability, and Predicted CH 4 Emission of Backgrounding Steers," Agriculture, MDPI, vol. 12(2), pages 1-20, February.
    2. Rama, Eric R. & Lacy, Curt, 2014. "An Economic Analysis of Three Stockering Systems in the Southeastern United States," 2014 Annual Meeting, February 1-4, 2014, Dallas, Texas 162476, Southern Agricultural Economics Association.
    3. Xi Yang & Nicholas D. Paulson & Madhu Khanna, 2016. "Optimal Mix of Vertical Integration and Contracting for Energy Crops: Effect of Risk Preferences and Land Quality," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 38(4), pages 632-654.
    4. Ruff, Shane P. & Peck, Dannele E. & Bastian, Christopher T. & Cook, Walter E., 2016. "Economics of Transitioning from a Cow-Calf- Yearling Operation to a Stocker Operation," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2016.
    5. Ruff, Shane P. & Peck, Dannele E. & Bastian, Christopher T. & Cook, Walter E., 2016. "Economics of Transitioning from a Cow-Calf-Yearling Operation to a Stocker Operation," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2015, pages 1-22.
    6. Diersen, Matthew A. & Fausti, Scott W., 2019. "Feedlot Size, Backgrounding Behavior, and Management Practices," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2019.

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