Hostname: page-component-7479d7b7d-fwgfc Total loading time: 0 Render date: 2024-07-11T03:20:13.486Z Has data issue: false hasContentIssue false
  • English
  • Français

Expected Utility Analysis of Stocker Cattle Ownership Versus Contract Grazing in the Southeast

Published online by Cambridge University Press:  28 April 2015

John D. Anderson ,
Curt Lacy ,
Charlie S. Forrest  and
Randall D. Little
John D. Anderson
Affiliation:
Department of Agricultural Economics, Mississippi State University, Starkville, MS
Curt Lacy
Affiliation:
Department of Agricultural and Applied Economics, University of Georgia, Tifton, GA
Charlie S. Forrest
Affiliation:
Department of Agricultural Economics, Mississippi State University, Starkville, MS
Randall D. Little
Affiliation:
Department of Agricultural Economics, Mississippi State University, Starkville, MS
Get access Rights & Permissions [Opens in a new window]

Abstract

Stocker cattle ownership is compared to contract grazing using stochastic simulation. Returns are evaluated for both cattle owners and caretakers in contract grazing agreements. For caretakers, contract grazing is significantly less risky than cattle ownership. Slightly to moderately risk-averse caretakers could be expected to prefer some type of contract grazing to direct ownership of cattle. For cattle owners, contracting reduces risk only slightly while significantly reducing expected returns.

Keywords

contractsexpected utilitygrazingstocker calvesQ0L1
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 36 , Issue 3 , December 2004 , pp. 719 - 730
Copyright
Copyright © Southern Agricultural Economics Association 2004

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Anderson, J.D., Coble, K.H., and Miller, J.C.. “Using Private Risk Management Instruments to Manage Counter-Cyclical Payment Risks Under the New Farm Bill.” Paper presented at the NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management, St. Louis, April 21-22, 2003.Google Scholar
Babcock, B.A., Choi, E.K., and Feinerman, E.. “Risk and Probability Premiums for CARA Utility Function.” Journal of Agricultural and Resource Economics 18(July 1993):17–24.Google Scholar
Clements, A.M., Mapp, H.R., and Eidman, V.R.. “A Procedure for Correlating Events in Farm Firm Simulation Models.” Experiment Station Bulletin T-131, Oklahoma State University, Stillwater, 1971.Google Scholar
Doye, D., Kletke, D., and Coe, N.. “Stocker Lease Agreements.” F-572, Oklahoma Cooperative Extension Service, Oklahoma State University, Stillwater, September 2002.Google Scholar
Hardaker, J.B., Huirne, R.B.M., and Anderson, J.R.. Coping with Risk in Agriculture. New York: CAB International, 1997.Google Scholar
Harrison, R.W., Bobst, B.W., Benson, F.J., and Meyer, A.L.. “Analysis of the Risk Management Properties of Grazing Contracts versus Futures and Options Contracts.” Journal of Agricultural and Applied Economics 28(December 1996):247–62.CrossRefGoogle Scholar
Johnson, F, Spreen, T.H., and Hewitt, T.. “A Stochastic Dominance Analysis of Contract Grazing Feeder Cattle.” Southern Journal of Agricultural Economics 19(December 1987):11–19.Google Scholar
Johnson, J., Morehart, M., Perry, J., and Banker, D.. Farmer's Use of Marketing and Production Contracts. Washington, DC: U.S. Department of Agriculture, Economic Research Service, Agricultural Economics Report No. 747, December 1996.Google Scholar
Krzanowski, W.J.Principles of Multivariate Analysis: A User's Perspective. New York: Oxford University Press, 1988.Google Scholar
Livestock Marketing Information Center. Internet site: http://lmic.info (Accessed May 12, 2004).Google Scholar
May, G.J., Jones, R.D., Langemeier, M.R., and Dhuyvetter, K.C.. “Influence of Grazing Lease Terms on Economic Optimal Stocking Rates.” Journal of Range Management 55(September 2002):461–68.CrossRefGoogle Scholar
McBride, W.D., and Key, N.. “Economic and Structural Relationships in U.S. Hog Production.” Washington, DC: U.S. Department of Agriculture, Economic Research Service, Agricultural Economics Report 818, February 2003.CrossRefGoogle Scholar
Naylor, T.H., Balintfy, J.L., Burdick, D.S., and Chu, K.. Computer Simulation Techniques. New York: John Wiley and Sons, Inc., 1966.Google Scholar
Perry, J., and Banker, D.. “Contracting Changes How Farms Do Business.” Rural Conditions and Trends 10(July 2000):50–56.Google Scholar
Sporleder, T. “Managerial Economics of Vertically Coordinated Agricultural Firms.” American Journal of Agricultural Economics 74(December 1992):1226–31.CrossRefGoogle Scholar
Teegerstrom, T., D'souza, G., Osborne, P., and Jones, K.. “To Contract or Not to Contract? A Decision Theory and Portfolio Analysis of Cattle Contract Grazing.” Agricultural and Resource Economics Review 26(October 1997):206–15.CrossRefGoogle Scholar
Trapp, J.N. “Simulation and Systems Modeling.” Agricultural Policy Analysis Tools for Economic Development. Tweeten, L., ed. Boulder, CO: Westview Press, 1989.Google Scholar
Ward, C, Schroeder, T., Barkley, A., and Koontz, S.. “Role of Captive Supplies in Beef Packing.” Washington, DC: U.S. Department of Agriculture, Grain Inspection Packers and Stockyards Administration, GIPSA-RR 96-3, May 1996.Google Scholar