Barry W. Bobst

Analysis of the Risk Management Properties of Grazing Contracts Versus Futures and Option Contracts

A stochastic budget simulator and generalized stochastic dominance are used to compare the risk management properties of grazing contracts to futures and option contracts. The results show that the risks of backgrounding feeder cattle are reduced significantly for pasture owners in a grazing contract. However, the risks of the cattle owner in a grazing contract are not significantly reduced. The results show that generally risk adverse pasture owners prefer grazing contracts to integrated production when traditional hedging is used to manage price risks. In addition, grazing contracts compare favorably with put option contracts for some pasture owners.

Beef Cow Numbers, Crop Acreage, and Crop Policy

Land use shifts between cropland and pasture affect the demand for beef cow inventories because economically viable cow-calf enterprises are pasture-based. Econometric analysis indicates an inverse relationship of −36.6 thousand head of beef cows per million acre change in harvested cropland. Curtailment of the expansion phase of the current cattle cycle and subsequent declines in cow numbers is in part attributable to large acreages converted from pasture to cropland in the early 1980s. Conversely, crop policies which encouraged reconversion to pasture would stimulate rebuilding beef cow numbers and increase beef supply.

Cost and Price Effects of Concentration Restrictions in the Plant Location Problem

Restrictions which prevent monopolization of spatial markets are imposed on the plant location problem for agricultural processing industries. The antitrust laws are assumed to be the source of these restrictions. Restricted and unrestricted solutions for an example problem and for the fluid milk processing industry in the state of Washington are compared. The restraints are shown to alter spatial organizations in such a way as to increase industry costs, but they also reduce the latitude for spatial price discrimination which may exist in unrestricted organizations.

EFFECTS OF LOCATION BASIS VARIABILITY ON HEDGING OF SLAUGHTER HOGS IN THE SOUTH

The location basis variability aspect of hedging While the study is strictly applicable only to one commodities in futures should be of especial concern period of time, calendar year 1971, and to the to Southern hog producers who might contemplate particular markets considered, the results indicate hedging in the live hog futures market. Location basis virtually no trace of location basis variability. variability affects hedgers who, like Southern hog Variances of hedging results in the Southern markets producers, are distant from designated futures studied were not significantly different from contract delivery points and cannot, as a practical variances in the delivery-point market. matter, make (or take) physical delivery to discharge

The dairy herd buyout program: An impact analysis for the US feeder cattle industry

Abstract Dairy production decisions are considered to be determined outside the beef cattle industry. However, through its effects on non-fed cattle marketings, the Dairy Herd Buyout Program affects both feeder and slaughter cattle prices in the US feeder cattle industry. An impact analysis of a year-long buyout programme indicates relatively severe first-quarter price effects. However, by the second quarter price flexibilities show lessened relative price impacts, even though prices continue to decline in absolute terms. Within two years, reduced beef cattle numbers lead to higher prices than would have occurred without the buyout programme.

AN INPUT-OUTPUT APPROACH TO THE STUDY OF THE FLOW OF FUNDS TO AGRICULTURAL CAPITAL MARKETS

Agriculture is experiencing an increasing reliance on commercial and governmental sources of capital in order to finance the adoption of new technology and the organizational changes made necessary by that technology. If this trend progresses, it is reasonable to suppose that the interdependence of flows of funds to the farm sector with flows to other sectors will become greater and will become a more important consideration in matters of farm credit policy. In a recent paper, Lee has called for further research into the implications of changes in the financial structure of the farm sector, among them the growth of alternative sources of funds and the changing roles of major lending groups. It is the intent of this paper to suggest a procedure through which the financing of the farm sector can be analyzed as one of a number of economic sectors which are financially interrelated.