Abstract
AbstractProducers often contemplate expanding or contracting production to take advantage of cyclical cattle price trends. This study quantifies profitability and risk implications of (1) constant herd size, (2) dollar cost averaging, and (3) price signal-based, anticipatory countercyclical expansion/contraction strategies. Weather simulation on forages with different calving season and land use intensity showed fall calving herds with added hay sales from greater fertilizer use and the countercyclical herd size management strategy to be most profitable regardless of weather or time period analyzed. Income risk was comparable to least fertilizer use. Overall, holding herd size constant led to little regret.
Highlights
Cattle production is an important industry to agriculture in many U.S states as cattle and calf sales amounted to 21% of aggregate U.S agricultural commodity sales of $78.2 billion in 2015 (U.S Department of Agriculture, National Agricultural Statistics Services [USDA-NASS], 2016)
Fall calving For the 1990–2003 cycle, our results indicated that the addition of weather effects on forage production increased risk in terms of range of annual cash operating profit (π) regardless of land use intensity (LUI) or herd size management (HSM) strategy (Figure 4)
This study examined the profitability of three HSM strategies under a variety of production conditions with and without simulated weather effects (Table 4)
Summary
The national drought in 2011–2012 led to large-scale herd liquidation resulting in subsequent, record cattle prices for 2012–2015. These record cattle prices, in turn, caused the eventual rebuilding of the U.S herd to end the 2004–2014 cattle cycle. Rosen (1987) proposes that producers capitalize on these factors by selling (retaining) calves when the exogenous shock results in an increase (decrease) in the market price. This type of behavior, perpetuates the price cycle
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