Essays on Feeder Cattle Market Dynamics PDF Download

Author: Ajewole Martins Kayode
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Languages : en
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The United State has experienced a downward trend in cattle and calves marketing over the last decade. The gross income from cattle sales has been in the opposite direction of inventory recorded during this period. With changes in the cattle income over the years, it is expected that the market will be changing over time. This dissertation contains three related essays on feeder cattle market dynamics. The first essay explores spatial arbitrage opportunities in the feeder cattle markets across the United States. The second essay examines the time variation in the feeder cattle spatial market connectedness. The third essay examine the impact of the 2005 energy policy on the feeder cattle markets through a time-varying analysis. The objective of the first essay is to determine the frequency of price differences in spatial feeder cattle markets offer profitable arbitrage? The study further investigates factors determining spatial arbitrage opportunities between pairs of markets. Arbitrage opportunities are at the lowest during the winter in the higher weight categories. The higher the number of cattle head the higher the size of arbitrage opportunities available between spatial markets. This study is the first to use a time-varying transaction cost in the feeder cattle market spatial analysis. The arbitrage information here will serve as a guideline for potential investors in the feeder cattle market. The major study limitation is that livestock is not a truly homogenous product, and there are always at least minor differences in animal prices within a market. The second essay examines the degree of connectedness of the feeder cattle markets in the United States over time. Spillover index measure are applied to capture the impact of price shocks within selected feeder cattle markets on market connectedness. The essay further evaluates the influence of spatiotemporal factors that may impact the degree of market connectedness over the same period, and the impact of drought on periodic price transmission between markets. This is the first study to apply a time-varying approach to study feeder cattle market linkages at the auction level and factors influencing the variation in market connectedness. Seven major auction markets across five states are selected, three markets within the state of Kansas and four markets outside Kansas. There is variation in the level of market connectedness over the study period. Long term drought severity accounts for some of the dynamics in the feeder cattle market. The third essay examines the time path and magnitude of volatility translation across major agricultural commodities and energy markets and compares the causal relationships between pre-ethanol boom and post-ethanol boom periods. Results reveal strong evidence for time variation in the implied volatility spillover between the feeder cattle market and the energy market. Despite a high correlation between crude oil and feeder cattle volatilities in the post-ethanol boom period, the linkage between the two commodities' volatilities is only for a short term.

Author: Justin Dean Bina
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Languages : en
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This thesis consists of two articles analyzing the feeder cattle futures contract as a price risk management tool. The first article implements transaction-level data and feeder cattle futures interaction terms in a hedonic pricing model framework to estimate optimal feeder cattle hedge ratios conditioned on the price of corn. This deviates from previous feeder cattle hedging literature, which typically employs aggregate weekly data and simple linear regressions of cash price against futures price to estimate hedge ratios. Hedging risk using corn-conditioned hedge ratios is compared to estimated hedge ratios that are not dependent on corn price. The second article again implements transaction-level data and a hedonic pricing model framework to evaluate whether feeder cattle basis risk has changed over time and to identify factors driving basis risk. The method developed in the second article differs from previous livestock basis risk assessments in that out-of-sample transaction price prediction errors are used to represent unexplained cash price deviations from feeder cattle futures price, or basis risk. Results from both articles indicate varying market conditions and animal characteristics have important impacts on the effectiveness of feeder cattle futures for price risk management in a heterogeneous market.

Author: Chia-Hsing Wang
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Category : Brand name products
Languages : en
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Abstract: I simulate growth and quality changes for pens of cattle and derive the value of pre-harvest sorting and genetic selection under grid pricing in a deterministic setting featuring animals with heterogeneous growth and quality maturation paths. The key findings are: 1) both pre-harvest sorting and increased genetic uniformity could substantially affect an individual cattle feeder's net revenues; 2) one could expect higher marginal revenue gains from the genetic uniformity than from pre-market sorting; 3) both methods exhibit diminishing marginal returns and 4) aggregate beef supply may increase as improving uniformity typically leads to later optimal marketing dates and, hence, heavier animals at slaughter. Post-slaughter quality-based pricing of cattle is increasingly common. This quality, however, is dependent upon unobservable quality characteristics of the feeder cattle used as inputs and unverifiable effort exerted by feedlot managers. Through stochastic simulation I construct incentive compatible quality risk-sharing contracts based upon final grid-quality schedules in feeder cattle markets. Darby and Karni suggest branding as means of solving the potential fraudulence problems in the credence good market. Umbrella branding is a common marketing practice to promote new product and bond the product quality to the brand reputation. However, while umbrella branding works well in the experience good market, no evidence shows it would work in the credence good markets. I set up a framework for discussing the effect of umbrella branding on the quality provision of credence good. The results show that brand reputation, product similarity, probability of detection, punishment severity, and exogenous quality noise all play important roles in determining a firm's decision on umbrella branding and fraud.

Author: Amber Kate Oerly
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Languages : en
Pages : 0

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The beef supply chain in the United States consists of many actors from the farm to retail level; with approximately 730,000 beef farms moving cattle to feedlots to slaughter plants and finally to various wholesale, retail, and export channels (USDA NASS, 2017). Thus, the U.S. beef industry is known to be one of the most complex segments of the agricultural sector. Periods of increased volatility and uncertainty related to economic, environmental, and social factors have further highlighted the dynamic nature of the U.S. beef industry and supply chain. This thesis contains two articles. The first article analyzes cowherd supply response in the United States and 14 major cow-calf states in the country. The second article estimates wholesale beef demand parameters. In Article 1, partial-adjustment supply models are estimated to quantify how changes in feeder cattle prices impact beef cow inventories at state and national levels. In Article 2, seeming unrelated regression (SUR) models are estimated to obtain updated wholesale beef demand elasticities. Both Articles 1 and 2 provide updated research related to two current knowledge gaps in the U.S. beef industry. Findings in both articles support the notion that price sensitivity may be decreasing in the U.S. beef-cattle industry.

Author: Kole Swanser
Publisher:
ISBN:
Category :
Languages : en
Pages : 136

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Author: Miao Zhen
Publisher:
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Category : Cattle
Languages : en
Pages : 156

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Over the last decade, Alberta cattle markets have experienced several extreme events, including the 2003 Canadian bovine spongiform encephalopathy (BSE) crisis and recent episodes of feed price surges. These events may have affected the price volatility of Alberta cattle and its interdependencies with the feed grain markets. This thesis consists of two essays that aim to assess market interdependencies, price volatility and volatility spillovers in the western Canadian feed barley, U.S. corn and Alberta cattle industries. The first essay employed the asymmetric generalized dynamic conditional correlation (AG-DCC) generalized autoregressive conditional heteroskedasticity (GARCH) framework to quantify volatility changes and market interdependencies among relevant markets. The model results suggested that the fed cattle price volatility was higher than the feeder cattle price volatility during the BSE crisis, while the opposite was true during non-BSE periods. Furthermore, no evidence was found to prove that the cattle and feed barley price volatility changed during food price surges. Although strong market interdependencies were found throughout the cattle supply chain, these relationships were weakened at the beginning of the BSE crisis. In contrast, weak interdependencies between the cattle and the feed grain markets were found. Moreover, the market relationships exhibited only small changes during the BSE crisis and feed price surges. The second essay assesses price volatility spillovers in the Alberta cattle supply chain and between the cattle and feed grain markets using the bivariate asymmetric BEKK-GARCH model. Although bidirectional price volatility spillovers were found throughout the Alberta cattle supply chain, spillovers between cattle and feed grain price volatility were found exclusively between the Alberta lighter feeder cattle and Lethbridge barley markets. Furthermore, model results indicated strong volatility spillovers from the U.S. corn market to the barley market. Interestingly, volatility spillovers were not found between the Alberta fed cattle and barley markets. However, barley price volatility might still be transmitted to the fed cattle market through feeder cattle price volatility. This thesis contributes to the relatively scarce literature on price volatility and market linkages in the western Canadian agricultural sector, providing useful information for agricultural producers managing market risks and for policy makers designing efficient price stabilization programs.

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Languages : en
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This dissertation studies the demand for imported and domestic demand models for meat and livestock. The first essay focuses on the separability between import and domestic meat demand and the performance of static versus dynamic models of consumer behavior. A new dynamic system of demand functions is developed and used to test the separability restrictions on U.S. meat consumption data. Our results indicate that imported meat consumption is non-separable from the U.S. consumption and a dynamic specification of the AIDS model is superior to the static AIDS model. The second essay analyzes the demand for domestic and imported livestock by the US meat processing industry and explores the existence of long-run relationships in the derived demand models which are required for the specification of dynamic demand models. The results indicate that the static inverse input demand model performed better than the dynamic models for both the beef and pork processing industries. The results of this study indicate that there is not a long run relationship in the variables of the inverse demand models for livestock. The third essay investigates the impact of the discovery BSE in Canadian cattle on the imported and domestic demand for livestock and meat in the United States. The analysis is based on the results of the first and second essays of the dissertation. A multi-market partial equilibrium model is utilized to simulate the effects of policy-induced shifts in quantities of imports supplied from Canada on the meat and livestock industries. Our simulation results predict small effects on cattle and the results are similar to prediction from Armington type models even though separability strongly rejected.

Author: Kaitlyn Maree Dinges Weber
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Chapter 1: Cattle Feeding Net Returns Simulation: A Confirmation Exercise. There is great variability in cattle feeding net returns across the industry due to varying economic risk levels dependent on a multitude of cattle characteristics and attributes. There are very few simulation studies that evaluate the deterministic and stochastic influence of performance and price metric relationship between such inputs and the resulting expected net return distribution. One such study is by Dennis et al. (2018), where the authors evaluated the impact of alternative animal health treatment strategies on net returns. The objective of this study is to replicate the results from Dennis et al.'s net return simulation and approximately verify such results utilizing the KSU - Beef Farm Management Guide Spreadsheet. Utilizing the equations, deterministic and stochastic inputs, and simulated distributions in Dennis et al.'s publication, results indicated that the difference between high-risk and metaphylaxis treated cattle averaged $23.77 higher across all weight categories compared to the original publication. One glaring difference between the results for the return simulation duplication and the original results is the shift of distributions rightward along the x-axis, which represents the net returns per head in dollars per head. The KSU Beef Finishing Budget calculated net return differs from the simulation distributional mean value by as little as $11.09 per head, up to the largest difference of $93.40 per head, with three key factors accounting for much of the differences-mortality, feeding cost, and total revenue. We were able to successfully replicate the study by Dennis et al. (2018) and identify what we believe to be the key difference-the feeder cattle purchase price-between the published study and the duplication attempt, while also comparing expected net returns utilizing the KSU Beef Finishing Budget and determine the calculations attributing to the differences. Chapter 2: Net Return Distributions Across Different Pricing Mechanisms in Fed Cattle Production. The cattle feeding industry has a lengthy history of being one of the most variable agricultural sectors concerning profitability (Tonsor, 2022). Price risk, production risk, and quality risk in the fed cattle industry all contribute to this profit variability of cattle placed on feed. While other studies have estimated cattle feeding net return models, this study explicitly considers the mortality rate, performance, quality, and expected net return difference between low health-risk cattle and high health-risk cattle that have been treated with metaphylaxis placed on feed using a stochastic simulation net returns framework that evaluates both live weight and grid pricing revenue methods. The results demonstrate that pen characteristics, such as entry weight, gender, and risk classification influence the mean and variability of production factors, defined as mortality, average daily gain, average feed conversion, and veterinary cost per head. The better we can predict animal health and quantify the uncertainty between low health-risk and high health-risk cattle, the more informed cattle feeders become regarding the profit variability between the two classifications of cattle given live weight and grid pricing. Due to higher transaction prices associated with healthier animals that generally have lower probabilities of morbidity and mortality, there is an incentive to buy higher health-risk cattle at a lower cost. Results further inform industry stakeholders by quantifying the price discount that high health-risk cattle must be purchased at relative to low health-risk cattle to achieve the same breakeven profit. Chapter 3: Evaluation of Bovine Respiratory Disease Morbidity in the Feedlot and its Effect on Net Return Distributions. Costs associated with morbidity are one of the most important determinants of profitability in the feedlot (Gardner et al., 1999). Bovine respiratory disease (BRD) is responsible for a large portion, approximately 75%, of feedlot morbidity and 50-80% of feedlot deaths (Edwards, 1996; Kelly & Janzen, 1986). This study models the impact of the percentage of a pen of cattle individually treated one time, two times, or three or more times for BRD on mortality, performance, and overall expected net returns per head by parameterizing production and profitability risks associated with BRD morbidity in the feedlot. This research adapts a fed cattle net returns model (Belasco et al., 2009; Dennis et al., 2018, 2020) to capture varying mortality rates and stochastic performance metrics-average daily gain, average feed conversion, and veterinary cost per head-as a function of BRD morbidity to model overall fed cattle net return risk. Results indicate that mean net returns per pen decrease as the overall percentage of animals treated within the pen increases. This is driven by a combination of things, including but not limited to, decreased animal performance due to BRD-related sickness, increased veterinary cost per head, and increased mean and standard deviation of the mortality distribution as morbidity increases.

Author: In-bae Chi
Publisher:
ISBN:
Category :
Languages : en
Pages : 94

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The third essay uses the new empirical industrial organization approach with the Bertrand model to measure the oligopsony market power in the U.S. cattle procurement market. It tests whether the market power is caused by concentration, cattle cycle, and seasonality. The results show that the oligopsony market power exists in the U.S. cattle procurement market. The cattle cycle and seasonality affect the oligopsony market power and the cattle cycle causes the change in market power. However, concentration has a negative effect on the oligopsony market power.

Author: William A. Brock
Publisher: Edward Elgar Publishing
ISBN: 9781782543046
Category : Business & Economics
Languages : en
Pages : 488

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'Buz Brock's contribution to economic theory in general and economic dynamics in particular are characterized by an unmatched richness of ideas and by deep theoretical, empirical as well as computational analysis. Brock's contribution to economic dynamics range from one extreme of the field, global stability of stochastic optimal growth models, to another extreme, market instability and nonlinearity in economic and financial modelling and data analysis. But his work also includes environmental and economic policy issues and, more recently, the modelling of markets as complex adaptive systems. This collection of essays reflects Brock's richness of ideas that have motivated economists for more than three decades already and will continue to influence many economists for the next decades to come.' - Cars H. Hommes, University of Amsterdam, The Netherlands 'Buz Brock has been, from the beginning of his career, one of the most original thinkers in dynamic economics. His early work showed that growth with random elements could be studied effectively and above all posed exactly the right questions. His more recent work has brought complexity theory to the fore and shown its implications for financial and other markets. In the process, he has both introduced and used econometric tools to show the relevance of his work to empirically observed phenomena. It is very useful to have his work in collected form.' - Kenneth J. Arrow, Stanford University, US This outstanding collection of William Brock's essays illustrates the power of dynamic modelling to shed light on the forces for stability and instability in economic systems. The articles selected reflect his best work and are indicative both of the type of policy problem that he finds challenging and the complex methodology that he uses to solve them. Also included is an introduction by Brock to his own work, which helps tie together the main aspects of his research to date.