Efficient Cash and Hedged Enterprise Combinations in Feeder Calf Backgrounding Operations

Barry W. Bobst, Orlen C. Grunewald and J. T. Davis

Journal of Agricultural and Applied Economics, 1982, vol. 14, issue 2, 105-110

Abstract: Backgrounding of feeder cattle is a growing specialty operation in the so-called “Fescue Belt” grasslands of the South (Bradford et al.). Backgrounding is largely a seasonal enterprise, consisting of the purchase of weaned calves that are placed on pasture and supplemental feed for several months and then resold for placement in feedlots. Since feeder calf and feeder cattle prices are among the most volatile of all classes of cattle, backgrounders face considerable price risk (Russell and Franzmann). In principle, hedging could shift this risk, but there has been a question whether hedging can be worthwhile, given the additional costs and financial obligations involved.

Date: 1982
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