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Expectations, Futures Prices, And Feedlot Behavior

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  • Smith, Rodney B.W.
  • Gardner, Bruce L.

Abstract

This paper attempts to improve our understanding of the effects of market prices on cattle marketing decisions, using futures prices as measures of unobserved price expectations. This approach has been used successfully in explaining feeder cattle placements, but not in marketings. Our aim is to provide empirical evidence on an unresolved issue in cattle marketing, the differential effects of the current price and near-term price expectations. When the cash price of fed cattle rises, the higher returns from current sales encourage increased marketings; yet, if the price is expected to remain high it may pay to feed cattle longer, holding them back from current marketing. By estimating marketings as a function of cash and futures prices simultaneously we hope to separate these two effects.

Suggested Citation

  • Smith, Rodney B.W. & Gardner, Bruce L., 1993. "Expectations, Futures Prices, And Feedlot Behavior," Staff Papers 13444, University of Minnesota, Department of Applied Economics.
  • Handle: RePEc:ags:umaesp:13444
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    File URL: http://purl.umn.edu/13444
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    References listed on IDEAS

    as
    1. Ospina, Enrique & Shumway, C. Richard, 1979. "Disaggregated Analysis Of Short-Run Beef Supply Response," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 4(02), December.
    2. Gershon Feder & Richard E. Just & Andrew Schmitz, 1980. "Futures Markets and the Theory of the Firm under Price Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 94(2), pages 317-328.
    3. Glenn Nelson & Thomas Spreen, 1978. "Monthly Steer and Heifer Supply," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 60(1), pages 117-125.
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    Keywords

    Livestock Production/Industries; Marketing;

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