An evaluation of changing profit risks in Kansas cattle feeding operations

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Show simple item record Herrington, Matthew Abbott 2013-07-25T16:10:37Z 2013-07-25T16:10:37Z 2013-07-25
dc.description.abstract Cattle feeders face significant profit risk when placing cattle on feed. Risks arise from both financial and biological sources. To date, few standardized measures exist to measure current risks against historic levels, or to obtain forward looking risk estimates. Those that do exist could benefit from updates and inclusion of additional risk elements. This study measures the risk of expected profits when cattle are placed on feed. This study creates a forward-looking estimate of expected feedlot profits using futures and options market data as price forecasts. Joint probability distributions are created for prices and cattle performance variables affecting feedlot profit margins. Monte Carlo simulation techniques are then employed to generate probability distributions of expected feedlot profits. Results show cattle feeding is a risky business and cattle feeders have been placing cattle on feed facing significantly negative expected returns since June, 2010. This assessment of negative expected profits is consistent with other findings. Over the study’s 2002 to 2013 time frame, the relative risk to cattle feeding profits accounted for by feed costs has been increasing, while the relative risk levels from feeder cattle and fed cattle prices remain steady. Additionally, the probability of realized per-head profits greater than $100 has been decreasing since 2009 and the probability of realized per-head profits less than $-100 has been increasingly rapidly. en_US
dc.language.iso en_US en_US
dc.publisher Kansas State University en
dc.subject Kansas cattle feeding en_US
dc.subject Risk en_US
dc.subject Profit estimation en_US
dc.subject Joint probability distributions en_US
dc.subject Monte Carlo simulation en_US
dc.subject Implied volatility en_US
dc.title An evaluation of changing profit risks in Kansas cattle feeding operations en_US
dc.type Thesis en_US Master of Science en_US
dc.description.level Masters en_US
dc.description.department Department of Agricultural Economics en_US
dc.description.advisor Ted C. Schroeder en_US
dc.description.advisor Glynn T. Tonsor en_US
dc.subject.umi Economics, Agricultural (0503) en_US 2013 en_US August en_US

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