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Effect of Risk Aversion on Feeder Cattle Prices

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  • Lee, Jung-Hee
  • Brorsen, B. Wade

Abstract

This paper determines the effects of cattle feeders' risk aversion on feeder cattle prices using pen data of Kansas feedlots. Higher profit risk results in lower feeder cattle prices. The elasticity of feeder cattle price with respect to profit risk was small (-0.013). The risk elasticity estimated here is similar to risk elasticities in previous studies and thus, the use of pen-level data does not seem to add much to the study of risk.

Suggested Citation

  • Lee, Jung-Hee & Brorsen, B. Wade, 1994. "Effect of Risk Aversion on Feeder Cattle Prices," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 26(2), pages 386-392, December.
    • Handle: RePEc:cup:jagaec:v:26:y:1994:i:02:p:386-392_02
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    1. B. Wade Brorsen & Jean-Paul Chavas & Warren R. Grant, 1987. "A Market Equilibrium Analysis of the Impact of Risk on the U.S. Rice Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(4), pages 733-739.
    2. Frances Antonovitz & Richard Green, 1990. "Alternative Estimates of Fed Beef Supply Response to Risk," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(2), pages 475-487.
    3. DeeVon Bailey & B. Wade Brorsen & Chris Fawson, 1993. "Buyer Concentration at Feeder Cattle Auctions," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 15(1), pages 103-119.
    4. Antonovitz, Frances & Roe, Terry, 1986. "A Theoretical and Empirical Approach to the Value of Information in Risky Markets," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 105-114, February.
    5. W.L. Nieuwoudt & Abner W. Womack & Stanley R. Johnson, 1988. "Measurement of Importance of Risk on Supply Response of Corn and Soybeans," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 10(2), pages 281-292.
    6. Ethridge, Don E. & Neeper, Jarral T., 1987. "Producer Returns from Cotton Strength and Uniformity: An Hedonic Price Approach," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 19(1), pages 91-98, July.
    7. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
    8. Ethridge, Don E. & Neeper, Jarral T., 1987. "Producer Returns From Cotton Strength And Uniformity: An Hedonic Price Approach," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 19(1), pages 1-7, July.
    9. Pardew, Jolie B. & Shane, Ronald L. & Yanagida, John F., 1986. "Structural Hedonic Prices Of Land Parcels In Transition From Agriculture In A Western Community," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 11(1), pages 1-8, July.
    10. Matthew T. Holt, 1993. "Risk Response in the Beef Marketing Channel: A Multivariate Generalized ARCH-M Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(3), pages 559-571.
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    2. Rahman, Shaikh Mahfuzur & Dorfman, Jeffrey H. & Turner, Steven C., 2004. "A Bayesian Approach to Optimal Cross-Hedging of Cottonseed Products Using Soybean Complex Futures," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(2), pages 1-16, August.
    3. Marsh, John M. & Brester, Gary W., 1999. "Technological Change In The U.S. Beef And Pork Sectors: Impacts On Farm-Wholesale Marketing Margins And Livestock Prices," Research Discussion Papers 29242, Montana State University, Department of Agricultural Economics and Economics, Trade Research Center.

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