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Factor Price Disparity in the Feeder Cattle Market and Retained Ownership Decision Making: An Application of Farm-Level Feed-Out Data

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  • White, Brad J.
  • Anderson, John D.

Abstract

This study uses farm-level data from a university feed-out program to evaluate how the value of feeder cattle ultimately realized through finishing and grid pricing differs from their market value at public auction. Results indicate that uncertainty related to feedlot performance, final carcass merits, and fed cattle prices likely contribute to significant risk premiums in the feeder cattle market. This is consistent with the theory of factor price disparity. This result indicates that producers of cattle with known feedlot performance and/or carcass potential may be better off retaining ownership of their calves or marketing them in a way that communicates the information that is known about their potential performance directly to the buyer.

Suggested Citation

  • White, Brad J. & Anderson, John D., 2005. "Factor Price Disparity in the Feeder Cattle Market and Retained Ownership Decision Making: An Application of Farm-Level Feed-Out Data," 2005 Annual meeting, July 24-27, Providence, RI 19129, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea05:19129
    DOI: 10.22004/ag.econ.19129
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    File URL: https://ageconsearch.umn.edu/record/19129/files/sp05wh01.pdf
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    References listed on IDEAS

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    1. Fausti, Scott W. & Feuz, Dillon M. & Wagner, John J., 1998. "Value Based Marketing For Fed Cattle: A Discussion Of The Issues," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 1(1), pages 1-18.
    2. Dillon M. Feuz & Scott W. Fausti & John J. Wagner, 1993. "Analysis of the efficiency of four marketing methods for slaughter cattle," Agribusiness, John Wiley & Sons, Ltd., vol. 9(5), pages 453-463.
    3. Scott W. Fausti & Dillon M. Feuz, 1995. "Production Uncertainty and Factor Price Disparity in the Slaughter Cattle Market: Theory and Evidence," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(3), pages 533-540.
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    Cited by:

    1. Tang, Minfeng & Lewis, Karen E. & Griffith, Andrew P. & Boyer, Christopher N., 2016. "Identifying Factors that Impact Returns to Retained Ownership of Cattle," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 229766, Southern Agricultural Economics Association.

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