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Feeder Cattle Price Slides

Author

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  • Brorsen, B. Wade
  • Coulibaly, Nouhoun
  • Richter, Francisca G. C.

Abstract

A theoretical model is developed to explain the economics of determining price slides for feeder cattle. The contract is viewed as a dynamic game with continuous strategies where buyer and seller are the players. We determine the value of the slide that assures subgame perfect equilibrium when the seller gives an unbiased estimate of cattle weight. An empirical model using Superior Livestock Auction (SLA) data shows that price slides used are smaller than those needed to cause the producer to give unbiased estimates of weight. Consistent with the model's predictions, producers slightly underestimate cattle weights.

Suggested Citation

  • Brorsen, B. Wade & Coulibaly, Nouhoun & Richter, Francisca G. C., 1999. "Feeder Cattle Price Slides," 1981-1999 Conference Archive 285739, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nc8191:285739
    DOI: 10.22004/ag.econ.285739
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    References listed on IDEAS

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    1. DeeVon Bailey & Monte C. Peterson & B. Wade Brorsen, 1991. "A Comparison of Video Cattle Auction and Regional Market Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 465-475.
    2. DeeVon Bailey & B. Wade Brorsen & Chris Fawson, 1993. "Buyer Concentration at Feeder Cattle Auctions," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 15(1), pages 103-119.
    3. Bailey, DeeVon & Peterson, Monte C., 1991. "A Comparison Of Pricing Structures At Video And Traditional Cattle Auctions," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(2), pages 1-12, December.
    4. B. Wade Brorsen & John Coombs & Kim Anderson, 1995. "The cost of forward contracting wheat," Agribusiness, John Wiley & Sons, Ltd., vol. 11(4), pages 349-354.
    5. Hoffman, Dennis L, 1987. "Two-Step Generalized Least Squares Estimators in Multi-equation," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 336-346, May.
    6. Harris, Milton & Raviv, Artur, 1979. "Optimal incentive contracts with imperfect information," Journal of Economic Theory, Elsevier, vol. 20(2), pages 231-259, April.
    7. Elam, Emmett W., 1992. "Cash Forward Contracting Versus Hedging Of Fed Cattle, And The Impact Of Cash Contracting On Cash Prices," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(01), pages 1-13, July.
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    2. Kastens, Terry L. & Schroeder, Ted C., 1993. "Expectations of Cattle Feeding Investors in Feeder Cattle Placements," Staff Papers 118159, Kansas State University, Department of Agricultural Economics.
    3. 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.
    4. Burdine, Kenneth H. & Maynard, Leigh J. & Halich, Greg, 2013. "Factors Affecting Feeder Cattle Prices in the Southeast," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 142976, Southern Agricultural Economics Association.
    5. 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(2), pages 1-12, December.

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