A Multi-Period Analysis of Two Common Livestock Management Strategies Given Fluctuating Precipitation and Variable Prices

John P. Ritten, W. Marshall Frasier, Christopher T. Bastian, Steven I. Paisley, Michael A. Smith and Siân Mooney

Journal of Agricultural and Applied Economics, 2010, vol. 42, issue 2, 177-191

Abstract: Many areas of the US recently endured a severe drought and management strategies to cope with the lack of forage production varied. A multi-period mathematical model is presented that estimates the outcomes of two common producer responses to changes in precipitation, partial liquidation and purchasing hay, given fluctuating cattle prices over a long term planning horizon. Results were further summarized with regression analysis and selected elasticities were calculated to reflect the sensitivity of outcomes to variability in precipitation and livestock prices. Although little impact was seen from utilizing additional hay as a strategy during drought, producers who follow this strategy are in a position to market more animals immediately post drought in general, resulting in better long run financial outcomes. Elasticity estimates suggest that profitability is more sensitive to variability in prices but that optimal choices of management strategies are more sensitive to variability in precipitation.

Date: 2010
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