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An Analysis of the Effects of Feed Ingredient Price Risk on the Selection of Minimum Cost Backgrounding Feed Rations

Published online by Cambridge University Press:  28 April 2015

Brian K. Coffey
Affiliation:
Department of Agricultural Economics, University of Kentucky, Lexington, KY 40546-0276
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Abstract

The traditional minimum cost feed ration linear programming model is expanded to permit risk management responses to price variability associated with feeding a particular ration across time. The cost minimizing objective function also considers feed costs in a mean-variance (E-V) framework. The model is specified using NRC nutrient requirements and an historic Feedstuffs price series. A decision-maker can choose his/her optimal ration by making tradeoffs between price risk and net income. The results should provide a basis for decision tools that allow livestock producers to manage the net income risk involved in the selection of a feed ration.

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Invited Paper Sessions
Copyright
Copyright © Southern Agricultural Economics Association 2001

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