Analysis of the Risk Management Properties of Grazing Contracts Versus Futures and Option Contracts

R Wes Harrison (), Barry W. Bobst, Fred J. Benson and Lee Meyer

Journal of Agricultural and Applied Economics, 1996, vol. 28, issue 2, 247-262

Abstract: A stochastic budget simulator and generalized stochastic dominance are used to compare the risk management properties of grazing contracts to futures and option contracts. The results show that the risks of backgrounding feeder cattle are reduced significantly for pasture owners in a grazing contract. However, the risks of the cattle owner in a grazing contract are not significantly reduced. The results also show that generally risk averse pasture owners prefer grazing contracts to integrated production when traditional hedging is used to manage price risks. In addition, grazing contracts compare favorably with put option contracts for some pasture owners.

Date: 1996
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Journal Article: ANALYSIS OF THE RISK MANAGEMENT PROPERTIES OF GRAZING CONTRACTS VERSUS FUTURES AND OPTION CONTRACTS (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jagaec:v:28:y:1996:i:02:p:247-262_00

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