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Expected Utility Analysis of Stocker Cattle Ownership Versus Contract Grazing in the Southeast

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  • Anderson, John D.
  • Lacy, Curt
  • Forrest, Charlie S.
  • Little, Randall D.
Abstract
Stocker cattle ownership is compared to contract grazing using stochastic simulation. Returns are evaluated for both cattle owners and caretakers in contract grazing agreements. For caretakers, contract grazing is significantly less risky than cattle ownership. Slightly to moderately risk-averse caretakers could be expected to prefer some type of contract grazing to direct ownership of cattle. For cattle owners, contracting reduces risk only slightly while significantly reducing expected returns.

Suggested Citation

  • Anderson, John D. & Lacy, Curt & Forrest, Charlie S. & Little, Randall D., 2004. "Expected Utility Analysis of Stocker Cattle Ownership Versus Contract Grazing in the Southeast," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(3), pages 1-12, December.
    • Handle: RePEc:ags:joaaec:43471
    DOI: 10.22004/ag.econ.43471
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    References listed on IDEAS

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    1. McBride, William D. & Key, Nigel D., 2003. "Economic And Structural Relationships In U.S. Hog Production," Agricultural Economic Reports 33971, United States Department of Agriculture, Economic Research Service.
    2. Johnson, Frank & Spreen, Thomas H. & Hewitt, Timothy, 1987. "A Stochastic Dominance Analysis of Contract Grazing Feeder Cattle," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 19(2), pages 11-19, December.
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    5. Teegerstrom, Trent & D'Souza, Gerard E. & Osborne, Phillip & Jones, Kezelee Q., 1997. "To Contract Or Not To Contract? A Decision Theory And Portfolio Analysis Of Cattle Contract Grazing," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 26(2), pages 1-11, October.
    6. Anderson, John D. & Coble, Keith H. & Miller, J. Corey, 2003. "Using Private Risk Management Instruments To Manage Counter-Cyclical Payment Risks Under The New Farm Bill," 2003 Conference, April 21-22, 2003, St. Louis, Missouri 18975, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    7. May, Gary & Jones, Rodney D. & Langemeier, Michael R. & Dhuyvetter, Kevin C., 2002. "Influence of Grazing Lease Terms on Economic Optimal Stocking Rates," Staff General Research Papers Archive 10078, Iowa State University, Department of Economics.
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    Cited by:

    1. Mohammad Khakbazan & Hushton C. Block & John Huang & Jeff J. Colyn & Vern S. Baron & John A. Basarab & Changxi Li & Chinyere Ekine-Dzivenu, 2022. "Effects of Silage-Based Diets and Cattle Efficiency Type on Performance, Profitability, and Predicted CH 4 Emission of Backgrounding Steers," Agriculture, MDPI, vol. 12(2), pages 1-20, February.
    2. Rama, Eric R. & Lacy, Curt, 2014. "An Economic Analysis of Three Stockering Systems in the Southeastern United States," 2014 Annual Meeting, February 1-4, 2014, Dallas, Texas 162476, Southern Agricultural Economics Association.
    3. Xi Yang & Nicholas D. Paulson & Madhu Khanna, 2016. "Optimal Mix of Vertical Integration and Contracting for Energy Crops: Effect of Risk Preferences and Land Quality," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 38(4), pages 632-654.
    4. Ruff, Shane P. & Peck, Dannele E. & Bastian, Christopher T. & Cook, Walter E., 2016. "Economics of Transitioning from a Cow-Calf- Yearling Operation to a Stocker Operation," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2016.
    5. Ruff, Shane P. & Peck, Dannele E. & Bastian, Christopher T. & Cook, Walter E., 2016. "Economics of Transitioning from a Cow-Calf-Yearling Operation to a Stocker Operation," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2015, pages 1-22.
    6. Diersen, Matthew A. & Fausti, Scott W., 2019. "Feedlot Size, Backgrounding Behavior, and Management Practices," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2019.

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