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Stochastic Modeling of Short-Term Cattle Operations

Author

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  • Abelardo Rodriguez
  • R. G. Taylor

Abstract

A risk-neutral stochastic dynamic programming model was used to test the certainty equivalence (CE) property in sequential decisions over a single season in a northeastern Colorado yearling operation. Stochastic rainfall represented risk in forage production, and stochastic steer prices represented marketing risk. Certainty equivalence held when cattle prices were stochastic and risk was increased as cattle sales were postponed. Intensive forage utilization as the grazing season progressed caused CE rejection at high stocking densities. High stocking densities with flexible marketing strategies had larger expected net present values than low stocking densities with fixed marketing strategies.

Suggested Citation

  • Abelardo Rodriguez & R. G. Taylor, 1988. "Stochastic Modeling of Short-Term Cattle Operations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(1), pages 121-132.
    • Handle: RePEc:oup:ajagec:v:70:y:1988:i:1:p:121-132.
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    File URL: http://hdl.handle.net/10.2307/1241982
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    Cited by:

    1. Ethridge, Don E. & Zhang, Ping & Dahl, Bill E. & Ervin, R. Terry & Rushemeza, Justin, 1990. "Cattle Ranching Production And Marketing Strategies Under Combined Price And Weather Risks," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 15(2), pages 1-11, December.
    2. Engler, John-Oliver & von Wehrden, Henrik & Baumgärtner, Stefan, 2019. "Determinants of farm size and stocking rate in Namibian commercial cattle farming," Land Use Policy, Elsevier, vol. 81(C), pages 232-246.
    3. White, Brad J. & Anderson, John D. & McKinley, W. Blair & Parish, Jane, 2007. "Factor Price Disparity and Retained Ownership of Feeder Cattle: An Application of Feedlot and Carcass Performance Data to Farm-Level Decision Making," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 39(1), pages 87-101, April.
    4. Fausti, Scott W. & Johnson, Brad & Epperson, William & Grathwohl, Nancy, 2003. "Risk and the Economic Incentive to Retain Ownership of Steer Calves," Economics Staff Papers 32023, South Dakota State University, Department of Economics.
    5. Lambert, David K., 1989. "Calf Retention And Production Decisions Over Time," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(1), pages 1-11, July.
    6. Lawrence, John D. & Kaylen, Michael S., 1990. "Risk Management For Livestock Producers: Hedging And Contract Production," Staff Papers 13496, University of Minnesota, Department of Applied Economics.
    7. Quaas, Martin F. & Baumgartner, Stefan & Becker, Christian & Frank, Karin & Muller, Birgit, 2007. "Uncertainty and sustainability in the management of rangelands," Ecological Economics, Elsevier, vol. 62(2), pages 251-266, April.
    8. Engler, John-Oliver & von Wehrden, Henrik, 2018. "Global assessment of the non-equilibrium theory of rangelands: Revisited and refined," Land Use Policy, Elsevier, vol. 70(C), pages 479-484.

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