Producers Valuation of Feeder Cattle Characteristics

Empirical evidence suggests that producers value livestock based on observable attributes, and that attribute prices reveal nothing about producers’ preferences or structural demands for such characteristics. However, previous studies have focused to analyzing the determinants of price differentials, and limited theoretical and empirical research have been conducted to estimate the true underlying valuation functions. The main objective of this study is to examine how feeder cattle attributes are valued by producers. A theoretical model is developed to estimate producers’ willingness to pay for heterogeneous inputs, and it is applied to feeder cattle auction markets in South Texas. The model is based on the hedonic literature and it is estimated using discrete choice statistical methods. Model estimation is carried out in two steps. In the first step the hedonic price function is calculated. Then, the effects of input attributes on producer’s valuation are recovered using profit maximization specifications. The dataset used to analyze producers’ valuation of feeder cattle characteristics consists of 5,092 beef calf sales collected at 8 livestock auction facilities across South Texas during 2014-2017. The findings of this study will be used to develop effective value-added management practices and educational programs based on buyers’ preferences.