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Differences in Prices and Price Risk Across Alternative Marketing Arrangements Used in the Fed Cattle Industry

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  • Muth, Mary K.
  • Liu, Yanyan
  • Koontz, Stephen R.
  • Lawrence, John
Abstract
Information on prices and price risk differences across marketing arrangements aids fed cattle producers in making choices about marketing methods. As part of the congressionally mandated Livestock and Meat Marketing Study, we investigated fed cattle price and price risk differences across marketing arrangements. The analysis uses data representing cattle purchased by 29 large beef packing plants from October 2002 through March 2005. Results indicate that marketing agreements offered the best tradeoff between price level and price risk. Forward contracts had the lowest average yet highly volatile prices. Auction barn prices were higher than other methods but also the most volatile.

Suggested Citation

  • Muth, Mary K. & Liu, Yanyan & Koontz, Stephen R. & Lawrence, John, 2008. "Differences in Prices and Price Risk Across Alternative Marketing Arrangements Used in the Fed Cattle Industry," ISU General Staff Papers 200801010800001481, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:200801010800001481
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    1. Schroeter, John R. & Azzam, Azzeddine M., 1999. "Econometric Analysis of Fed Cattle Procurement in the Texas Panhandle," Staff General Research Papers Archive 11365, Iowa State University, Department of Economics.
    2. John R. Schroeter & Azzeddine Azzam, 2003. "Captive supplies and the spot market price of fed cattle: The plant-level relationship," Agribusiness, John Wiley & Sons, Ltd., vol. 19(4), pages 489-504.
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    4. Ward, Clement E. & Koontz, Stephen R. & Schroeder, Ted C., 1998. "Impacts From Captive Supplies On Fed Cattle Transaction Prices," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(2), pages 1-21, December.
    5. Tian Xia & Richard J. Sexton, 2004. "The Competitive Implications of Top-of-the-Market and Related Contract-Pricing Clauses," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 124-138.
    6. Schroeder, Ted C., 1997. "Fed Cattle Spatial Transactions Price Relationships," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 29(2), pages 347-362, December.
    7. Elam, Emmett W., 1992. "Cash Forward Contracting Versus Hedging Of Fed Cattle, And The Impact Of Cash Contracting On Cash Prices," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(1), pages 1-13, July.
    8. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    9. Ted C. Schroeder & Rodney Jones & James Mintert & Andrew P. Barkley, 1993. "The Impact of Forward Contracting on Fed Cattle Transaction Prices," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 15(2), pages 325-337.
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    Cited by:

    1. Bastian, Christopher T. & Jones Ritten, Chian & Feuz, Bridger & Nagler, Amy M. & Smutko, Steven, 2018. "Can Producers Bargain for Better Prices? Implications from Wyoming Focus Groups," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2018.
    2. Brorsen B. Wade & Fain James R. & Maples Joshua G., 2018. "Alternative Policy Responses to Increased Use of Formula Pricing," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 16(1), pages 1-11, January.
    3. Maples, Joshua G. & Lusk, Jayson L. & Peel, Derrell S., 2019. "Technology and evolving supply chains in the beef and pork industries," Food Policy, Elsevier, vol. 83(C), pages 346-354.
    4. Bocart, Fabian Y.R.P. & Hafner, Christian M., 2015. "Fair Revaluation of Wine as an Investment," Journal of Wine Economics, Cambridge University Press, vol. 10(2), pages 190-203, November.
    5. Kim, Jong-Jin & Zheng, Xiaoyong, 2015. "Effects of Alternative Marketing Arrangements on the Spot Market Price Distribution in the U.S. Hog Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(2), pages 1-24, May.
    6. McKendree, Melissa G. S. & Saitone, Tina L. & Schaefer, K Aleks, 2020. "Cattle Cycle Dynamics in a Modern Agricultural Market: Competition in Holstein Cattle Procurement," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304380, Agricultural and Applied Economics Association.
    7. Schulz, Lee L. & Schroeder, Ted C. & Ward, Clement E., 2011. "Trade-Related Policy and Canadian-U.S. Fed Cattle Transactions Basis," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 36(2), pages 1-13, August.
    8. Abahana, Zelalem & Diersen, Matthew A. & Li, Jing & Klein, Nicole L., 2010. "Fed Cattle Forward Contract Volume and Basis Relationship," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61150, Agricultural and Applied Economics Association.
    9. Lee, Yoonsuk & Ward, Clement E. & Brorsen, B. Wade, 2010. "Relationships among Prices across Alternative Marketing Arrangements for Fed Cattle and Hogs," 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida 56282, Southern Agricultural Economics Association.
    10. repec:hum:wpaper:sfb649dp2013-018 is not listed on IDEAS

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    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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