The Role of Price Risk Management in Mitigating Fed Cattle Profit Exposure
By: Belasco, Eric J.
Belasco, Eric J., The Role of Price Risk Management in Mitigating Fed Cattle Profit Exposure, Journal of Agricultural and Resource Economics, Volume 33, Issue 3, December 2008, Pages 332-348
This study identifies the amount and origin of risk in cattle feedlot operations through the use of simulation techniques. Ex ante profit risks are evaluated under scenarios with varying levels of price protection through the use of forward pricing. An empirical probability density function is simulated to capture the mean and variability in prices and cattle production yields within a specified profit under difference assumptions regarding the relative importance of production risk and price risk in overall cattle feeding profits.