Changing market dynamics and value-added premiums in southeastern feeder cattle markets

Abstract

ABSTRACT The southeast region from Kentucky and Virginia south to Florida is home to more than 5 million beef cows, representing a significant source of farm income. Because very little feedlot capacity exists in the region, feeder cattle sales represent the majority of beef cattle receipts. This work examined numerous factors that affect feeder cattle prices including the effect of changes in corn price, the dynamics of BW uncertainty in video auctions, and price premiums associated with age and source verification and cattle selling certified natural. Sale data from Internet sales and preconditioned feeder cattle sales were made available by a large cattle marketing firm in the region from 2008 to 2011. A hedonic model was used to examine the effect of cattle characteristics and market factors on the selling price of feeder cattle. Evidence was found that corn price negatively affected feeder cattle prices, but the magnitude was found to be smaller than in previous research. Premiums for age and source verification were found to be moderate at $15.00 per animal, which was largely consistent with estimates from other regions of the United States. Premiums for cattle selling certified natural were estimated to be around $17.00 per animal. Finally, in contrast to previous research, results suggest that market incentives with respect to existing price–BW relationships have changed such that incentives to underestimate BW in video auctions may not have existed during this time period.