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Adaptive Planning Over the Cattle Price Cycle

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  • Bentley, Ernest
  • Shumway, C. Richard

Abstract

Cycles in beef cattle inventories and prices have been documented as far back as 1880 (Breimyer). The inability to identify optimal herd management strategies in response to fluctuating cattle prices is frequently blamed for the low historical returns received by cattle producers (Farris and Mallett). Cattle producers typically react to rising prices by increasing the size of their breeding herd and liquidating a portion of the herd when prices decline. Long lags between the time a cow is bred and the time her calf is weaned and ready for market make it difficult for cow-calf operators to make optimal long-run production plans. And because a cow has a long productive life, several years are required to evaluate the decision to invest in a larger breeding herd by adding more heifers. During this period, prices may fluctuate drastically, so that with hindsight, the decision to increase the investment in the herd may have been a poor choice. The same problem occurs when the herd is liquidated because of dim prospects of earning an immediate profit from the intact herd. The use of other resources probably does not fluctuate much over the cattle cycle. Bebout discovered that land committed to calf production remains fairly constant even in periods of low profits.

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  • Bentley, Ernest & Shumway, C. Richard, 1981. "Adaptive Planning Over the Cattle Price Cycle," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 13(1), pages 139-148, July.
    • Handle: RePEc:cup:jagaec:v:13:y:1981:i:01:p:139-148_02
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    References listed on IDEAS

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    2. Hertzler, Greg & Cothern, James H., 1979. "The Sub-Optimality Of The Beef Cycle," 1979 Annual Meeting, July 29-August 1, Pullman, Washington 278293, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    1. Gutierrez, Paul H. & Dalsted, Norman L. & Jonk, Yvonne C., 1989. "Selection and Development of the Replacement Asset: The Case of the Replacement Beef Heifer," WAEA/ WFEA Conference Archive (1929-1995) 244997, Western Agricultural Economics Association.
    2. McClelland, John W. & Wetzstein, Michael E. & Noles, Richard K., 1987. "Optimal Replacement Policies for Recyclable Assets," 1987 Annual Meeting, August 2-5, East Lansing, Michigan 270113, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Burton, Robert O., Jr. & Wollo, J. Wesseh, 1986. "Adjustments In A Beef/Sheep Farm In Response To The Cattle Cycle: The Potential For Increased And More Stable Income," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 15(1), pages 1-8, April.
    4. Mathews, Kenneth H., Jr. & Short, Sara D., 2001. "The Beef Cow Replacement Decision," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 19(2), pages 1-21.
    5. Buddhika Patalee & Glynn T. Tonsor, 2021. "Weather effects on U.S. cow‐calf production: A long‐term panel analysis," Agribusiness, John Wiley & Sons, Ltd., vol. 37(4), pages 838-857, October.
    6. Innes, Robert & Carman, Hoy F., 1988. "Tax Reform And Beef Cow Replacement Strategy," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 13(2), pages 1-13, December.
    7. Falconer, Lawrence L. & Long, Charles R. & McGrann, James M., 1996. "A Decision Support Aid For Beef Cattle Investment Using Expert Systems," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 28(1), pages 1-13, July.
    8. Pope, C. Arden & Shumway, C. Richard, 1984. "Management of Intensive Forage-Beef Production Under Yield Uncertainty," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 16(2), pages 37-44, December.

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