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Efficient Cash and Hedged Enterprise Combinations in Feeder Calf Backgrounding Operations

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  • Bobst, Barry W.
  • Grunewald, Orlen C.
  • Davis, J. T.

Abstract

Backgrounding of feeder cattle is a growing specialty operation in the so-called “Fescue Belt” grasslands of the South (Bradford et al.). Backgrounding is largely a seasonal enterprise, consisting of the purchase of weaned calves that are placed on pasture and supplemental feed for several months and then resold for placement in feedlots. Since feeder calf and feeder cattle prices are among the most volatile of all classes of cattle, backgrounders face considerable price risk (Russell and Franzmann). In principle, hedging could shift this risk, but there has been a question whether hedging can be worthwhile, given the additional costs and financial obligations involved.

Suggested Citation

  • Bobst, Barry W. & Grunewald, Orlen C. & Davis, J. T., 1982. "Efficient Cash and Hedged Enterprise Combinations in Feeder Calf Backgrounding Operations," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 14(2), pages 105-110, December.
    • Handle: RePEc:cup:jagaec:v:14:y:1982:i:02:p:105-110_02
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    Cited by:

    1. Cady, David Walter, 1987. "Analysis of hedging strategies for southern Iowa stocker operations," ISU General Staff Papers 1987010108000017567, Iowa State University, Department of Economics.
    2. Anaman, Kwabena A. & Boggess, William G., 1986. "A Stochastic Dominance Analysis Of Alternative Marketing Strategies For Mixed Crop Farms In North Florida," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 18(2), pages 1-9, December.
    3. Harrison, R. Wes, 1998. "Stochastic Dominance Analysis Of Futures And Option Strategies For Hedging Feeder Cattle," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 27(2), pages 1-11, October.

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