Alternative Pricing and Delivery Strategies for Alberta Cattle Feeders
This study evaluates the risk and returns to cattle feeding in Alberta from the application of alternative marketing and pricing strategies. Feedlot finishing of 650 pound calves and 800 pound yearlings is modeled over the years from 1980 to 1993. The results of the study are based on the domestic and US marketing of live cattle using traditional cash marketing, futures contracts, put options, and forward production contracting systems. Use of the Western Domestic Feed Barley contract is also simulated. The results showed that barley price changes produced relatively small return changes compared to feeder and fat cattle price changes. An important source of return risk was found to be basis risk. Production contracting strategies which eliminated basis risk were found to provide the best returns in a market based risk-return comparison. The use of put options did not add value to cattle feeding investments.
|Date of creation:||1995|
|Date of revision:|
|Contact details of provider:|| Postal: 515 General Services Building, University of Alberta, Edmonton, AlbertaT6G 2H1|
Phone: (780) 492-4225
Fax: (780) 492-0268
Web page: http://www.rees.ualberta.ca/
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- Lapan, Harvey E. & Moschini, GianCarlo & Hanson, Steven D., 1991.
"Production Hedging and Speculative Decisions with Options and Future Markets,"
Staff General Research Papers Archive
10810, Iowa State University, Department of Economics.
- Harvey Lapan & Giancarlo Moschini & Steven D. Hanson, 1991. "Production, Hedging, and Speculative Decisions with Options and Futures Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(1), pages 66-74.
- Brian S. Freeze & A. Gene Nelson & Wesley N. Musser & R. Hironaka, 1990. "Feeding and Marketing Portfolio Effects of Cattle Feeding in Alberta," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 38(2), pages 233-252, 07.
- C. A. Carter & R. M. A. Loyns, 1985. "Hedging Feedlot Cattle: A Canadian Perspective," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(1), pages 32-39.
- 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), July.
- Blank, Steven C., 1988.
"Research On Futures Markets: Issues, Approaches And Empirical Findings,"
225817, University of California, Davis, Department of Agricultural and Resource Economics.
- Blank, Steven C., 1989. "Research On Futures Markets: Issues, Approaches, And Empirical Findings," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(01), July.
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