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Factor Price Disparity and Retained Ownership of Feeder Cattle: An Application of Feedlot and Carcass Performance Data to Farm-Level Decision Making

Published online by Cambridge University Press:  28 April 2015

Brad J. White ,
John D. Anderson ,
W. Blair McKinley  and
Jane Parish
Brad J. White
Affiliation:
College of Veterinary Medicine, Kansas State University, Manhattan, KS
John D. Anderson
Affiliation:
Department of Agricultural Economics, Mississippi State University, Mississippi State, MS
W. Blair McKinley
Affiliation:
Department of Animal and Dairy Science, Mississippi State University, Mississippi State, MS
Jane Parish
Affiliation:
Department of Animal and Dairy Science, Mississippi State University, Mississippi State, MS
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Abstract

In this study, we used farm-level data from a university feed-out program to evaluate how the value of feeder cattle ultimately realized through finishing and grid pricing differs from their market value at public auction. Consistent with the theory of factor price disparity, results indicate that significant risk premiums exist in the feeder cattle market. Producers of cattle with known feedlot performance, carcass potential, or both might be better off retaining ownership of their calves or marketing them in a way that communicates the information that is known about their potential performance directly to the buyer.

Keywords

factor price disparityfeeder cattlegrid pricingQ11Q12Q13
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 39 , Issue 1 , April 2007 , pp. 87 - 101
Copyright
Copyright © Southern Agricultural Economics Association 2007

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