IDEAS home Printed from https://ideas.repec.org/a/cup/jagaec/v36y2004i03p719-730_02.html
   My bibliography  Save this article

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

Author

Listed:
  • Anderson, John D.
  • Lacy, Curt
  • Forrest, Charlie S.
  • Little, Randall D.

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.

Suggested Citation

  • Anderson, John D. & Lacy, Curt & Forrest, Charlie S. & Little, Randall D., 2004. "Expected Utility Analysis of Stocker Cattle Ownership Versus Contract Grazing in the Southeast," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 36(3), pages 719-730, December.
    • Handle: RePEc:cup:jagaec:v:36:y:2004:i:03:p:719-730_02
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S1074070800026973/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Teegerstrom, Trent & D'Souza, Gerard E. & Osborne, Phillip & Jones, Kezelee Q., 1997. "To Contract Or Not To Contract? A Decision Theory And Portfolio Analysis Of Cattle Contract Grazing," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 26(2), pages 1-11, October.
    2. Anderson, John D. & Coble, Keith H. & Miller, J. Corey, 2003. "Using Private Risk Management Instruments To Manage Counter-Cyclical Payment Risks Under The New Farm Bill," 2003 Conference, April 21-22, 2003, St. Louis, Missouri 18975, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    3. Johnson, Frank & Spreen, Thomas H. & Hewitt, Timothy D., 1987. "A Stochastic Dominance Analysis Of Contract Grazing Feeder Cattle," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 19(2), pages 1-9, December.
    4. Thomas L. Sporleder, 1992. "Managerial Economics of Vertically Coordinated Agricultural Firms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(5), pages 1226-1231.
    5. McBride, William D. & Key, Nigel D., 2003. "Economic And Structural Relationships In U.S. Hog Production," Agricultural Economic Reports 33971, United States Department of Agriculture, Economic Research Service.
    6. Harrison, R. Wes & Bobst, Barry W. & Benson, Fred J. & Meyer, Lee, 1996. "Analysis Of The Risk Management Properties Of Grazing Contracts Versus Futures And Option Contracts," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 28(2), pages 1-16, December.
    7. May, Gary & Jones, Rodney D. & Langemeier, Michael R. & Dhuyvetter, Kevin C., 2002. "Influence of Grazing Lease Terms on Economic Optimal Stocking Rates," Staff General Research Papers Archive 10078, Iowa State University, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xi Yang & Nicholas D. Paulson & Madhu Khanna, 2016. "Optimal Mix of Vertical Integration and Contracting for Energy Crops: Effect of Risk Preferences and Land Quality," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 38(4), pages 632-654.
    2. Diersen, Matthew A. & Fausti, Scott W., 2019. "Feedlot Size, Backgrounding Behavior, and Management Practices," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2019.
    3. Mohammad Khakbazan & Hushton C. Block & John Huang & Jeff J. Colyn & Vern S. Baron & John A. Basarab & Changxi Li & Chinyere Ekine-Dzivenu, 2022. "Effects of Silage-Based Diets and Cattle Efficiency Type on Performance, Profitability, and Predicted CH 4 Emission of Backgrounding Steers," Agriculture, MDPI, vol. 12(2), pages 1-20, February.
    4. Ruff, Shane P. & Peck, Dannele E. & Bastian, Christopher T. & Cook, Walter E., 2016. "Economics of Transitioning from a Cow-Calf- Yearling Operation to a Stocker Operation," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2016.
    5. Ruff, Shane P. & Peck, Dannele E. & Bastian, Christopher T. & Cook, Walter E., 2016. "Economics of Transitioning from a Cow-Calf-Yearling Operation to a Stocker Operation," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2015, pages 1-22.
    6. Rama, Eric R. & Lacy, Curt, 2014. "An Economic Analysis of Three Stockering Systems in the Southeastern United States," 2014 Annual Meeting, February 1-4, 2014, Dallas, Texas 162476, Southern Agricultural Economics Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anderson, John D. & Lacy, Curt & Forrest, Charlie S. & Little, Randall D., 2003. "Stocker Cattle Ownership Vs. Contract Grazing: A Comparison Of Risk-Adjusted Returns," 2003 Annual Meeting, February 1-5, 2003, Mobile, Alabama 35055, Southern Agricultural Economics Association.
    2. Teegerstrom, Trent & D'Souza, Gerard E. & Osborne, Phillip & Jones, Kezelee Q., 1997. "To Contract Or Not To Contract? A Decision Theory And Portfolio Analysis Of Cattle Contract Grazing," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 26(2), pages 1-11, October.
    3. Altair Dias de Moura & Sandra Martin & Diane Mollenkopf, 2009. "Product specification and agribusiness chain coordination: introducing the coordination differential concept," Agribusiness, John Wiley & Sons, Ltd., vol. 25(1), pages 112-127.
    4. Unterschultz, James R., 2000. "New Instruments For Co-Ordination And Risk Sharing Within The Canadian Beef Industry," Project Report Series 24046, University of Alberta, Department of Resource Economics and Environmental Sociology.
    5. Sayle, James & Anderson, John D. & Coble, Keith H. & Hudson, Darren, 2006. "Optimal Hedging Strategies for Early-Planted Soybeans in the South," 2006 Annual meeting, July 23-26, Long Beach, CA 21200, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Hrabrin BACHEV, 2010. "Framework For Analisis Of Agrarian Contracts," Management Research and Practice, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 2(1), pages 39-66, March.
    7. Bachev, Hrabrin, 2003. "Организация На Снабдяването С Финанси В Българските Ферми [Governing of finance supply in Bulgarian farms]," MPRA Paper 99340, University Library of Munich, Germany.
    8. Li Yu & Peter F. Orazem, 2014. "O-Ring production on U.S. hog farms: joint choices of farm size, technology, and compensation," Agricultural Economics, International Association of Agricultural Economists, vol. 45(4), pages 431-442, July.
    9. Barkema, Alan & Drabenstott, Mark & Cook, M. L., 1993. "The Industrialization of the U.S. Food System," Food and Agricultural Marketing Issues for the 21st Century - FAMC 1993 Conference 265920, Food and Agricultural Marketing Consortium (FAMC).
    10. Jeffrey S. Royer, 1995. "Potential for cooperative involvement in vertical coordination and value-added activities," Agribusiness, John Wiley & Sons, Ltd., vol. 11(5), pages 473-481.
    11. Lajili, Kaouthar & Barry, Peter J. & Sonka, Steven T. & Mahoney, Joseph T., 1997. "Farmers' Preferences For Crop Contracts," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(2), pages 1-17, December.
    12. Hrabrin Bachev, 2017. "Supply Chain Risk Management – Agri-Food Implications," Noble International Journal of Business and Management Research, Noble Academic Publsiher, vol. 1(1), pages 10-30, January.
    13. Yu, Li & Hurley, Terrance M. & Kliebenstein, James B. & Orazem, Peter F., 2012. "Firm Size, Technical Change, and Wages in the Pork Sector, 1990-2005," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(2), pages 1-17, August.
    14. Todd H. Kuethe & Mitch Morehart, 2012. "The profit impacts of risk management tool adoption," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 72(1), pages 104-116, May.
    15. Johnson, R.W.M. & Petrey, L.A. & Schroder, William R., 1996. "Agribusiness: Political Economy and Market Structure - Toward a Structure for Agribusiness," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 64(02), pages 1-6, August.
    16. Ahearn, Mary Clare & Banker, David E. & MacDonald, James M., 2003. "Price And Nonprice Terms In U.S. Agricultural Contracts," 2003 Annual meeting, July 27-30, Montreal, Canada 21947, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Timothy A. Wise, "undated". "Identifying the Real Winners from U.S. Agricultural Policies," GDAE Working Papers 05-07, GDAE, Tufts University.
    18. Ng, Desmond W. & Salin, Victoria, 2012. "An Institutional Approach to the Examination of Food Safety," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 15(2), pages 1-26, May.
    19. Viet Hoang & Vinh Nguyen, 2023. "Determinants of small farmers' participation in contract farming in developing countries: A study in Vietnam," Agribusiness, John Wiley & Sons, Ltd., vol. 39(3), pages 836-853, July.
    20. Key, Nigel D., 2004. "Manure Application Standards and EQIP Payments: The Distribution of Economic and Environmental Costs and Benefits across US Hog Farms," 2004 Annual meeting, August 1-4, Denver, CO 19937, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jagaec:v:36:y:2004:i:03:p:719-730_02. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/aae .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.