IDEAS home Printed from https://ideas.repec.org/p/ags/umaesp/13444.html
   My bibliography  Save this paper

Expectations, Futures Prices, And Feedlot Behavior

Author

Listed:
  • Smith, Rodney B.W.
  • Gardner, Bruce L.

Abstract

This paper attempts to improve our understanding of the effects of market prices on cattle marketing decisions, using futures prices as measures of unobserved price expectations. This approach has been used successfully in explaining feeder cattle placements, but not in marketings. Our aim is to provide empirical evidence on an unresolved issue in cattle marketing, the differential effects of the current price and near-term price expectations. When the cash price of fed cattle rises, the higher returns from current sales encourage increased marketings; yet, if the price is expected to remain high it may pay to feed cattle longer, holding them back from current marketing. By estimating marketings as a function of cash and futures prices simultaneously we hope to separate these two effects.

Suggested Citation

  • Smith, Rodney B.W. & Gardner, Bruce L., 1993. "Expectations, Futures Prices, And Feedlot Behavior," Staff Papers 13444, University of Minnesota, Department of Applied Economics.
    • Handle: RePEc:ags:umaesp:13444
    DOI: 10.22004/ag.econ.13444
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/13444/files/p93-08.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.13444?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Bruce L. Gardner, 1976. "Futures Prices in Supply Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 58(1), pages 81-84.
    2. Shonkwiler, John Scott & Hinckley, Suzanne, 1985. "A Generalized Supply Response/Factor Demand Model And Its Application To The Feeder Cattle Market," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 10(2), pages 1-9, December.
    3. Glenn Nelson & Thomas Spreen, 1978. "Monthly Steer and Heifer Supply," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 60(1), pages 117-125.
    4. Ospina, Enrique & Shumway, C. Richard, 1979. "Disaggregated Analysis Of Short-Run Beef Supply Response," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 4(2), pages 1-18, December.
    5. Marvin L. Hayenga & Duane Hacklander, 1970. "Monthly Supply-Demand Relationships for Fed Cattle and Hogs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 52(4), pages 535-544.
    6. Gershon Feder & Richard E. Just & Andrew Schmitz, 1980. "Futures Markets and the Theory of the Firm under Price Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(2), pages 317-328.
    7. Krause, Kenneth R., 1991. "Cattle Feeding, 1962-89: Location and Feedlot Size," Agricultural Economic Reports 308149, United States Department of Agriculture, Economic Research Service.
    Full references (including those not matched with items on IDEAS)

    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. Smith, Rodney B.W. & Gardner, Bruce L., 1989. "Expectations, Futures Prices, and Feedlot Operator Behavior," Working Papers 197622, University of Maryland, Department of Agricultural and Resource Economics.
    2. Burton, Diana M. & Love, H. Alan, 1996. "A Review of Alternative Expectations Regimes in Commodity Markets: Specification, Estimation, and Hypothesis Testing Using Structural Models," Agricultural and Resource Economics Review, Cambridge University Press, vol. 25(2), pages 213-231, October.
    3. Scheitrum, Daniel Paul & Carter, Colin A. & Jaffe, Amy Myers, 2017. "Testing substitution between private and public storage in the U.S. oil market: A study on the U.S. Strategic Petroleum Reserve," Energy Economics, Elsevier, vol. 64(C), pages 483-493.
    4. Lee, Tsoung-Chao & Seaver, Stanley K., 1980. "Forecasts Of Farm Animal Production In The New England States And In The U.S," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 0(Number 1), pages 1-6, April.
    5. Lee, Tsoung-Chao & Seaver, Stanley K., 1980. "Forecasts Of Farm Animal Production In The New England States And In The U.S," Journal of the Northeastern Agricultural Economics Council, Northeastern Agricultural and Resource Economics Association, vol. 9(1), pages 1-6, April.
    6. D. V. Gordon, 1990. "Negative Supply Response And The Role Of Price Expectations In A Two‐Period Model Of Cattle Production," Journal of Agricultural Economics, Wiley Blackwell, vol. 41(2), pages 184-195, May.
    7. Probst, Joel Keith, 1982. "Monthly cattle supply and price forecasting models," ISU General Staff Papers 1982010108000018043, Iowa State University, Department of Economics.
    8. Park, Timothy A. & Antonovitz, Frances, 1991. "Econometric Tests Of Firm Decision Making Under Uncertainty: Optimal Output And Hedging Decisions," 1991 Annual Meeting, August 4-7, Manhattan, Kansas 271264, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Just, Richard E. & Rausser, Gordon C., 1985. "Determination of the predominance of various expectations patterns in commodity futures and spot markets," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt9wv9s614, Department of Agricultural & Resource Economics, UC Berkeley.
    10. Larry S. Karp, 1987. "Methods for Selecting the Optimal Dynamic Hedge When Production is Stochastic," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(3), pages 647-657.
    11. Duc Huynh, Toan Luu & Burggraf, Tobias & Nasir, Muhammad Ali, 2020. "Financialisation of natural resources & instability caused by risk transfer in commodity markets," Resources Policy, Elsevier, vol. 66(C).
    12. Chembezi, Duncan M. & Womack, Abner W., 1992. "Regional Acreage Response For U.S. Corn And Wheat: The Effects Of Government Programs," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 24(1), pages 1-12, July.
    13. Chambers, Robert G. & Quiggin, John, 1992. "On Separation Results in Forward and Futures Markets," Working Papers 197790, University of Maryland, Department of Agricultural and Resource Economics.
    14. Haile, Mekbib G. & Kalkuhl, Matthias & Braun, Joachim von, 2013. "Inter-and intra-annual global crop acreage response to prices and price risk," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149695, Agricultural and Applied Economics Association.
    15. McNulty, Mark S., 1985. "Information usage in the formation of price expectations: theory and econometric tests," ISU General Staff Papers 1985010108000013085, Iowa State University, Department of Economics.
    16. Haile, M.G. & Kalkuhl, M., 2014. "Volatility in the international food markets: implications for global agricultural supply and for market and price policy," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 49, March.
    17. Blank, Steven C., 1989. "Hedging Objectives, Hedging Markets, And The Relevant Range Of Hedge Ratios," Working Papers 225826, University of California, Davis, Department of Agricultural and Resource Economics.
    18. Kim, Jae-Gyeong, 1993. "Futures markets in an open economy," ISU General Staff Papers 1993010108000011461, Iowa State University, Department of Economics.
    19. Kastens, Terry L. & Schroeder, Ted C., 1994. "Cattle Feeder Behavior And Feeder Cattle Placements," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(2), pages 1-12, December.
    20. David J. Pannell & Getu Hailu & Alfons Weersink & Amanda Burt, 2008. "More reasons why farmers have so little interest in futures markets," Agricultural Economics, International Association of Agricultural Economists, vol. 39(1), pages 41-50, July.

    More about this item

    Keywords

    Livestock Production/Industries; Marketing;

    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:ags:umaesp:13444. 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: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/daumnus.html .

    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.