Literature Review: Price Risk Management Contributions to Economic Sustainability in the Cattle Industry

Andrew P. Griffith, Christopher N. Boyer and Ian Kane

No 322767, Extension Reports from University of Tennessee, Department of Agricultural and Resource Economics

Abstract: Environmental and social sustainability have historically been the focus of beef sustainability research and are probably the most familiar among the public. However, there is considerable need for research related to economic sustainability in the beef cattle industry. Economic sustainability is commonly understood to be a farm’s capability to survive or to be economically viable in over time, and a key component is access to and using effective tools and strategies to reduce losses. Cattle producers manage many forms of risk including price risk (Hart, Babcock, and Hayes, 2001). Researchers have investigated the effectiveness of various ways to mitigate price risk (Burdine and Halich, 2014; Hall et al., 2003; Hill, 2015; Williams et al., 2014), but producers have been reluctant to adopt these management tools (Hill, 2015). The events occurring in 2019 (Finney County Tyson Foods slaughterhouse fire) and 2020 (COVID-19) strengthen the argument that managing price risk is vital for long-term economic sustainability for beef cattle producers. Providing stocker and cow-calf producers with information on how to utilize price risk management tools would benefit these producers in making economically sustainable decisions and allowing them to endure and continue operating during and following economic shocks. Therefore, the specific objectives of this literature review were to: 1. Determine the positive attributes of currently available price risk management tools for beef cattle including futures contracts, options and livestock risk protection insurance; and 2. Determine the attributes of currently available price risk management tools that lead to non-use or fail to mitigate risk. The goal of this literature review is to provide a comprehensive summary of research on risk management tools for beef cattle producers and help guide continuing education to beef cattle producers as well as inform policy makers and private industry on ways to improve price risk management to enhance economic sustainability for beef cattle producers.

Keywords: Farm Management; Marketing; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 6
Date: 2022-07-27
New Economics Papers: this item is included in nep-agr and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:ags:utaeer:322767

DOI: 10.22004/ag.econ.322767

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