Utilizing Ultrasound Technology to Improve Livestock Marketing Decisions

This study estimates the value of using ultrasound technology to improve cattle marketing decisions by optimally choosing a particular marketing method. For the particular group of cattle analyzed, results indicate that using ultrasound information to selectively market cattle could have increased revenue by $25.53/head, $4.98/head, or $32.90/head, compared with simply marketing all animals on a live weight, dressed weight, or grid basis, respectively. Even if producers incorporate such information as placement weight, days on feed, and breed into their expectations about final carcass characteristics, our results indicate that ultrasound measures could improve average revenue by $4.16/head.     

Expected Utility,Risk, and Marketing Behavior: Theory and Evidence from the Fed Cattle Market

The effect of carcass quality uncertainty on the structure of the slaughter cattle market is investigated. A theoretical extension of the “Theory of Factor Price Disparity” is provided. It is demonstrated that the coexistence of a risk premium wedge between marketing channel (live weight, dressed weight, and grid) pricing mechanisms, in conjunction with varying degrees of producer risk aversion or producer perception of carcass quality uncertainty, contributes to the coexistence of multiple marketing channels. It is also demonstrated that risk and risk preference provide the linkage between carcass quality uncertainty and producer marketing decisions. We demonstrate how this linkage can affect the structure of the fed cattle market and the variability in slaughter volume across marketing channels. We also confirm the linkage between value‐based production techniques that increase seller information on carcass quality and seller increased usage of grid pricing regardless of actual carcass quality. Empirical evidence is provided in support of the supposition that carcass quality uncertainty plays a role in grid market share variability.     

Managing economic risk in value-based marketing of fed cattle

This research investigates optimal price risk management strategies for fed cattle producers engaged in grid pricing. Stochastic simulation is used to determine optimal hedge ratios for fed cattle priced on a live weight basis or on a series of grids that vary in terms of premium/discount structure as well as base price. Results indicate that the optimal hedging strategy is greatly affected by the base price used in a particular grid. This has significant implications for pricing efficiency in the cattle market. Base prices that are linked more closely with downstream markets offer the potential to improve pricing efficiency; however, the risk associated with these prices is difficult to manage effectively with existing futures instruments.     

Improving Market Selection for Fed Beef Cattle: The Value of Real-Time Ultrasound and Relations Data

The introduction of value-based marketing has provided the industry with the means to price cattle based on their desired attributes and has provided an alternative marketing channel for producers to select. Gains can be made by selecting animals that will be "in the grid" for value-based marketing channels while screening out animals that won't and sending them to dressed-value or live-weight marketing channels. This study estimates the gains from using real-time ultrasound (RTU) as well as information on graded animal relations (i.e., animals that have the same parentage slaughtered and graded in previous years) to predict carcass quality and yield grades prior to slaughter. These predictions are used in an optimization model designed to select the marketing channel for individual animals that will maximize returns. The optimal marketing strategy from this study involves a mix of live-weight, dressed-weight and grid sales methods rather than marketing all of the animals together. The results suggest that increases in returns in the range of $0.61–27.26 per head from using relations data, $9.04-16.75 per head from using RTU measures and $11.27-27.93 per head from using both to selectively market beef animals. These estimates do not account for the gains that could be obtained from using RTU to improve market timing, i.e., to time when the animal will grade best.     

Risk and marketing behavior: pricing fed cattle on a grid

A seven‐year comparative study of grid pricing versus average pricing of slaughter cattle was conducted to evaluate carcass quality market signals. The primary objectives of the study are to determine: (1) if market signals sent through the grid pricing system indicate an improvement in the grid incentive mechanism over time, (2) how changes in the grid premium and discount structure associated with carcass quality affect the market risk premium, and (3) if changes in price risk (variance) affect producer marketing decisions. An Exponential‐Autoregressive‐Conditional‐Heteroskedasticity‐in‐Mean (EARCH‐in‐Mean) modeling procedure was adopted. Empirical results suggest that the grid premium and discount structure is slowly adjusting carcass quality market signals to encourage marketing on a grid and discourage marketing by the pen. The inclusion of the conditional variance in the empirical model indicates that variance associated with the carcass quality risk premium adds financial risk associated with the adoption of grid pricing.     

Market and Cost Structure in the U.S. Beef Packing Industry: A Plant-Level Analysis

A resurgence of consolidation in the U.S. meat packing industry in the past few decades has stimulated academic and policy debate. Issues raised include the role of cost economies in driving these patterns, and the effects on the agricultural sector (cattle producers) from market power. Here, plant level cost and revenue data for U.S. beef packing plants are used to estimate a cost-based model incorporating cattle- and output-market pricing behavior. The robust results indicate little market power exploitation in either the cattle input or beef output markets, and that any apparent evidence is counteracted by cost efficiencies such as utilization and scope economies.     

Demand for Beef from Cattle Administered Growth Hormones or Fed Genetically Modified Corn: A Comparison of Consumers in France, Germany, the United Kingdom, and the United States

We compare consumer valuations of beef ribeye steaks from cattle produced without growth hormones or genetically modified corn in France, Germany, the United Kingdom, and the United States. Results suggest that French consumers place a higher value on beef from cattle that have not been administered added growth hormones than U.S. consumers; however, valuations of non-hormone-treated beef are statistically indistinguishable across Germany, the United Kingdom, and the United States. Results also suggest that European consumers place a much higher value on beef from cattle that have not been fed genetically modified corn than U.S. consumers.     

Regime switching and oligopsony power: the case of U.S. beef processing

In this article, we estimate a model of oligopsony behavior under imperfect monitoring of rival actions to analyze weekly marketing margin data for the U.S. beef packing industry. Oligopsonists are hypothesized to follow a discontinuous pricing strategy in equilibrium, and we focus on shocks in the normal throughput of supply as a potential catalyst for regime switching between cooperative and noncooperative phases. We adopt an algorithm developed by Bellone (2005) that relies on Hamilton’s (1989) multivariate first‐order Markov process to test for the cooperative/noncooperative switching behavior. We find strong evidence that links switching conduct by packers to disruptions in coordinating the derived demands for processed beef with the supply of live cattle. Once switched, cooperative regimes lasted an average of 21 weeks, while noncooperative regimes averaged 33 weeks. The average marketing margin for processed beef was 68% lower in the noncooperative regimes compared to the cooperative regimes. This led to an annual average increase in profits of 408 million dollars to the beef packing industry and about an 8–9% reduction in live cattle prices.     

Risk and (Re-)organization in Agriculture: The Economics of Back grounding Cattle in Saskatchewan

The beef system in western Canada is currently undergoing restructuring. To increase the number of animals a feedlot finishes, their portion of the production process is being narrowed to the final 136 kgof weight gain. This results in a stage of production known as backgrounding, where calves are grown before entering the feedlot. This paper explains the reorganization that is occurring in the context of transaction cost economics, which explains this evolution as a process in which the governance structure involved in contracting has minimized the transaction costs. New methods of marketing these backgrounded cattle are being developed, which may increase the profitability of these operations. This paper measures the impacts of five different marketing options on the backgrounding enterprise's risk and returns. Thirteen enterprises are modeled, using various levels of capital and labor intensities, live stock numbers, sizes of calves fed and average daily gains. These models are simulated from 1978 to 1994 using costs of production and prices of cattle. Profits per head calculations allow the comparison of the enterprise efficiencies. The marketing alternatives are then evaluated using mean-variance rule(E-V) and stochastic dominance methods of risk analysis.     

Abstracts of Second- and Third-Place Undergraduate Papers

Bulls account for half of the genetic input when making improvements in cattle herds. Changing bulls is less costly than changing cows; therefore it is often the case bulls account for more rapid improvements in heritable traits. One of the problems that breeders who supply bulls face is that the attributes of bulls come bundled together so that it is difficult to determine what the value of improvements in a bull might be worth. This research estimates what values beef producers implicitly place on particular characteristics when deciding which bull will best fit the needs of their farm. A hedonic pricing model was estimated using ordinary least squares on actual transaction data and reveals the value buyers of bulls implicitly place on specific traits. For example, a ribeye area of 12.8 in² at the mean sale price reveals a buyer would be willing to pay an additional $80.39 for a bull with an additional square inch. Likewise, a bull with a 1242 lb. 365-day weight at the mean sale price reveals a buyer would be willing to pay an additional $1.83 for an additional pound. Therefore, this research reveals an incentive for producers of bulls to focus on improving the genetic make-up of their bulls they offer for sale.     

Valuing Quality Attributes and Country of Origin in the Korean Beef Market

For beef exporters, one of the important questions in the Korean beef market is why Korean consumers are willing to pay almost three times more for domestic Korean beef than they pay for imported beef. To answer this question, we surveyed 1,000 shoppers in Seoul, Korea, and conducted a conjoint analysis on consumers’ willingness to pay (WTP) for country equity of domestic vs. imported beef and quality attributes of marbling, freshness, genetically modified organism (GMO)‐free feed ingredients and antibiotic‐free production. Among all factors contributing to the price differentials, the most important factor seems to be the country of origin followed by the use of GMO feeds and antibiotics in beef production, marbling grade and freshness. This study finds that Korean consumers value origins of imported beef approximately $14/lb less than the Korean origin. Korean consumers’ valuation of beef quality and country of origin differs by some demographic groups: older vs. younger generations, homemakers vs. non‐homemakers and consumers who prefer to purchase packaged beef vs. consumers who prefer to purchase butcher shop beef. Our empirical findings suggest that the top priority for beef exporters who wish to increase sales and value of their beef in the Korean market must be to counter Korean consumers’ strong ethnocentrism by improving the value of their country of origin.     

Testing for Processor Market Power in the Markets for Cattle and Hogs in Canada

Deviations of livestock input prices from processor marginal value product are usually interpreted as an indication of the application of market power by the meat packing industry. However, market power depends on economic conditions that can influence the behavior of meat packers in the market for cattle and hogs. An industry-level translog profit function is applied to data on the Canadian finished cattle and hog markets and industry-wide oligopsony market power functions are estimated. The estimates suggest beef packers exercised a small but sustained amount of market power in the Canadian finished cattle market from 1978 to 1997. This is not the case in the market for hogs, which was competitive from 1960 to 1997. Application of market power in packers'purchases of farm animals decreased with increases in the utilization of domestic supply of slaughter animals and with increased levels of livestock exports. Livestock productivity increases appear to have significantly enhanced oligopsony power in packers'purchases of farm animals. The analysis suggests that beef processors may exert market power when cattle prices are relatively higher.     

Integration to Fragmentation: Post-BSE Canadian Cattle Markets, Processing Capacity, and Cattle Prices

This paper examines the potential impacts of expansions to Canadian cattle slaughter capacity with varying assumptions about the ability to export live cattle to the United States. A synthetic model is calibrated to historic data and then used to gauge the impacts of changing slaughter capacity, commercial grade beef import competition, and export potential for lower quality cuts on the Canadian cattle and beef sector. Expanded slaughter capacity improves fed cattle prices, but cull prices remain below pre-BSE levels. Reduced ability to export lower quality beef and increased import competition from commercial grade beef also further depress cattle prices .
Le présent article examine les répercussions potentielles d'une augmentation de la capacité d'abattage au Canada à l'aide de diverses hypothèses sur la capacité d'exporter des bovins vivants aux États-Unis. Un modèle synthétique est calibré selon les données historiques et utilisé pour évaluer les répercussions qu'une modification de la capacité d'abattage, de la concurrence quant à l'importation de bœuf de qualité commerciale et de l'exportation éventuelle de coupes de viande de qualité inférieure aurait sur le secteur canadien du bœuf. Une capacité d'abattage accrue améliore les prix des bovins finis, mais les prix des animaux de réforme demeurent inférieurs aux niveaux de prix observés avant la découverte de l'ESB. La diminution de la capacité d'exporter du bœuf de qualité inférieure et l'augmentation de la concurrence pour l'importation de bœuf de qualité commerciale contribuent également à faire baisser davantage les prix des bovins .     

Evolving Producer–Packer–Customer Linkages in the Beef and Pork Industries

The U.S. pork and beef sectors are rapidly moving from traditional cash markets to formal vertical linkages. In 1999, 27% of hogs and 65% of cattle were traded in the cash market and packers owned 18% of hogs and 5% of cattle; the rest were procured via marketing contracts. Contrary to popular opinion that plant efficiency is the impetus for the change, packers clearly identified quality concerns as the dominant reason for using marketing contracts or self-production. Quality standards and procurement systems to achieve them will increase in importance with the introduction of more branded pork and beef products.     

Risk Sharing and Compensation Guides for Managers and Members of Vertical Beef Alliances

Vertical alliances in beef are growing in importance. Alliances struggle with decisions on how to compensate members. Both conceptual development and empirical analysis are needed. A conceptual framework building on transaction cost and principal agent literature is developed and strategies for sharing feeding and packing margins are analyzed. Premiums for high-quality cattle increase revenues to the alliance. Margin and premium sharing interactions are investigated and guidelines are presented. Compensations that provide incentives for improving cattle quality help ensure the success of alliances as vertical coordination and quality control mechanisms.     

中国南方肉牛生产空间关联分析及产业发展路径研究

[目的]为了厘清中国南方地区肉牛生产的空间关联关系，挖掘南方地区牛肉增产潜力，探索统一的生产大市场建设路径。[方法]文章基于2008—2020年肉牛生产数据，采用修正后的引力模型构建了南方地区15个省（市、区）的肉牛生产空间关联关系，运用社会网络分析法刻画了各地在肉牛生产空间关联网络中的地位和传导方向。[结果]（1）南方地区肉牛生产具有较强的空间关联性，其关联关系趋于稳定，但仍有巨大发展空间。（2）整体来看，关联网络中，安徽、贵州、四川和云南扮演“中心行动者”的角色；湖南和江西扮演“中介行动者”的角色，上海、福建、浙江和江苏扮演“边缘行动者”的角色。（3）生产板块已初具规模，贵州、云南、广西、四川和湖南是动能传递的终点，是发展南方地区肉牛生产的钥匙。[结论]未来南方肉牛生产大市场建设应在大力发展西南肉牛优势养殖区的基础上，加快建设湖南和江西的基础设施，充分发挥其地理区位的优越性和中介功能。加强省际交流，改良牛种，保障溢出板块的生产动能，完善双向溢出板块的连接功能，挖掘接收板块的生产潜力，布局完善的生产功能区。     

Measuring price discovery between nearby and deferred contracts in storable and nonstorable commodity futures markets

Using price discovery measures, including Putniņš’ (2013) information leadership share and intraday data, we quantify the proportional contribution of nearby and deferred contracts in price discovery in the corn and live cattle futures markets. On average, nearby contracts reflect information more quickly than deferred contracts in the corn market, but have a relatively less dominant role in the live cattle market. In both markets, the nearby contract loses dominance when its relative volume share dips below 50%, which typically occurs when the nearby is close to maturity. Regression results indicate that the share of price discovery is mainly related to trading volume and time to expiration in both markets. In the corn market, price discovery share between nearby and deferred contracts is also related to inverse carrying charges, crop year differences, USDA announcements, market crashes, and commodity index position rolls. Differences between corn and live cattle markets are consistent with differences in the contracts’ liquidity and commodity storability.     

中国肉牛养殖生产布局的阶段特征、变迁路径和影响机制——基于2008—2019年省域统计数据的空间计量分析

[目的]为充分了解“十一五”“十二五”“十三五”期间中国肉牛养殖及育肥养殖生产布局的阶段特征、变迁路径和影响机制。[方法]文章运用2008—2019年中国各地肉牛年末存栏量和牛肉产量数据,利用生产集中度、生产重心迁移轨迹阐述生产布局的阶段特征和变迁路径,利用莫兰指数、吉尔里指数和G指数分析空间相关性,利用空间面板模型分析影响因素及效应。[结果]肉牛养殖生产重心向西北方迁移了154.6km,自2017年空间正相关逐渐显著,粗饲料资源禀赋、劳动力质量、技术进步和非农就业机会是布局变迁的重要影响因素;肉牛育肥养殖生产重心向西迁移了119.15km,三大指数均具有显著性,饲料资源禀赋、劳动力质量、技术进步、市场价格、交通通达度、畜牧产业比较优势和非农就业机会是布局变迁的重要影响因素。[结论]肉牛养殖和育肥养殖均呈现出由农区向牧区迁移趋势,且存在空间正相关性,但具体变迁路径和影响机制有所差异,就此提出“合理编制肉牛生产规划、系统加强流通环节建设、强化科学技术支撑、保障饲料稳定供应”的政策建议。     

DETERMINANTS OF CHANGE IN THE NORTH AMERICAN FEEDER-CATTLE ECONOMY

Changing flow patterns characterize the North American cattle industry, which are having a significant impact on all aspects of Canadian agriculture. A brief review of important changes taking place in the feeder cattle industry is given together with an analysis of forces influencing the changing interregional economic relationships.
The results suggest an increasing rate of adjustment may be needed in the future as the economic variables and technological advances responsible for much of the change in the past continue to influence the Canadian cattle industry. The impact of change will not occur evenly across all areas and segments of the industry with the interregional trends that have developed particularly the expansion in flows from Western Canada to the Western United States showing no sign of slowing down. Eastern Canada may be under increasing pressure to expand either its imports of feeder cattle and dressed beef or develop its own feeder supply.     

Effects of Bovine Spongiform Encephalopathy Outbreaks on U.S. Cattle and Beef Prices

U.S. trade of beef and live cattle declined substantially after the discoveries of bovine spongiform encephalopathy (BSE) in Canada and the United States in 2003. In this study, an econometric model is developed to estimate the effects of lifting trade restrictions on U.S. cattle and beef prices. Results show that increases in imports of Canadian cattle and beef would lower prices of slaughter steers, feeder steers, and retail beef, but these negative impacts would be more than negated by the positive effects on prices that would result if beef exports return to near pre-BSE levels.