Journal of Agricultural and Resource Economics
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Feeder-calf prices are determined by the interaction of many factors. This study uses transaction data from Iowa preconditioned and regular feeder-calf auction sales to quantify the impact of a wide variety of factors, several of which have not been used in previous studies on feeder-calf prices. Notably, market premiums for preconditioned sales versus regular sales, feedlot capacity utilization, and seller reputation are found to be significant factors affecting feeder-calf prices. Estimated coefficients are then used to predict prices to demonstrate how this information can be used in making management and marketing decisions.
Recent econometric studies indicate that the effect of government farm subsidies on farmland rental rates may be smaller than once thought. This literature has corrected for bias due to expectation error in measured subsidy payments. We suggest two additional sources of bias—inertia and tenancy arrangements—that may explain the discrepancy between theoretical predictions and empirical estimates of subsidy incidence. We identify a model that accounts for these issues, employ panel data from Kansas to estimate it, and find that an additional dollar per acre of government subsidy increases rental rates by $0.12 per acre in the short run and $0.37 per acre in the long run.
Value-added management practices for cow-calf producers have become prevalent as feeders have recognized the value of calves raised with certified health and weaning programs. Export markets requiring age and source verification or non-hormone treated cattle and advancement of markets for naturally raised cattle have also presented profit opportunities for cow-calf producers. This study estimates the value of value-added calf production and marketing programs. Weaned steer calves sold with certified health programs realized $7 to $10 per cwt premiums. Age- and sourceverified steers received $1 to $2 per cwt premiums exceeding added costs of about $0.67 per cwt in 2010 despite rapidly expanding supply.
This research compares practical methods of forecasting basis, using current market information for wheat, soybeans, corn, and milo (grain sorghum) in Kansas. Though generally not statistically superior, an historical one-year average was optimal for corn, milo, and soybean harvest and post-harvest basis forecasts. A one-year average was also best for wheat post-harvest basis forecasts, whereas a five-year average was the best method for forecasting wheat harvest basis. Incorporating current market information, defined as basis deviation from historical average, improved the accuracy of post-harvest basis forecasts. A naive forecast incorporating current information was often the most accurate for post-harvest basis forecasts.
This study estimates the price determinants of show quality quarter horses sold at auction. Several characteristics including genetic and physical traits, quality of pedigree, and performance record of the horse, as well as the horse’s offspring, were found to significantly impact selling price. Sale order positively affected price and appears to be driven by buyers rather than intentional ordering of the horses. A common practice at horse auctions is for the seller to reject the final bid offered and buy back the horse. Model-predicted prices for these buy-back horses indicate they are not undervalued by the final bids, based on their characteristics.
Successful risk management strategies for agribusiness firms based on futures and options contracts are contingent on their ability to accurately forecast basis. This research addresses three primary questions as they relate to basis forecasting accuracy: (a) What is the impact of adopting a time-to-expiration approach, as compared to the more common calendar-date approach? (b) What is the optimal number of years to include in calculations when forecasting livestock basis using historical averages? and (c) What is the effect of incorporating current basis information into a historical-average-based forecast? Results indicate that use of the time-to-expiration approach has little impact on forecast accuracy compared to using a simple calendar approach, but forecast accuracy is improved by incorporating at least a portion of current basis information into basis forecasts.
Can remotely sensed imagery improve hedonic land price models? A remotely sensed variable was added to a hedonic farmland value model as a proxy for land productivity. Land cover data were used to obtain urban and recreational effects as well. The urban and recreational effects were statistically significant but economically small. The remotely sensed productivity variable was statistically significant and economically large, indicating that knowing the “greenness” of the land increased the explanatory power of the hedonic price model. Thus, depending upon the cost of this information, including remotely sensed imagery in traditional hedonic land price models is economically beneficial.
This study simulates whether Kansas wheat, soybean, corn, and milo producers could have profitably used deferred futures plus historical basis cash price expectations for post-harvest unhedged and hedged grain storage decisions from 1985-97. The signaled storage decision is compared to a representative Kansas producer whose crop sales mimic average Kansas marketings each year. Using 23 grain price locations, the simulations resulted in an 11 cents per bushel annual increase in grain storage profits for wheat, 27 cents for soybeans, -17 cents for corn, and -20 cents for milo; however, storage profit differences varied substantially across locations. Hedging tended to decrease risk, but not impact profitability.
Extension marketing economists commit substantial resources to outlook and market analysis. Producers demand this information and use it to make production and marketing decisions. This study analyzes responses to a marketing survey of producers and extension marketing economists to discern similarities and differences in their perceptions regarding market timing, futures market efficiency, and risk management. Producer and extension perceptions are consistent with regard to several marketing issues, although they are not always consistent with published research results. Both producers and extension economists disagree that producers will receive a lower average price by forwarding contracting, and many do not believe hedging reduces risk and lowers expected return. Extension marketing economists rate risk reduction as a less important goal of marketing strategies than do producers.
Bulls are an important investment for commercial beef cattle producers since, over time, bulls introduce most of the new genetic attributes into typical beef cow herds. Therefore, heritable bull traits determine bull prices. Bulls possess a large number of traits to consider in pricing. In recent years, new measures of both qualities have been introduced in the form of expected progeny differences (EPDs). This study estimates market values associated with specific bull attributes, recently introduced EPDs, and bull sale marketing efforts. Important bull price determinants include bull color, polled, conformation, muscling, disposition, age, birth weight, weaning weight, milk EPD, birth and weaning weight EPDs, sale location, order bull was sold, whether the bull had a picture in the sale catalog, and whether a percentage of semen rights were retained by the seller.
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