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

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

No 322764, Extension Reports from University of Tennessee, Department of Agricultural and Resource Economics

Abstract: Sustainable beef production is categorized into environmental stewardship, economic opportunity and social diligence. By this definition, everyone within the beef value chain has a role to play in enhancing sustainable beef production. Environmental and social sustainability are probably the most familiar among the public. However, economic sustainability in the beef cattle industry is equally important. In general, economic sustainability is a farm’s capability to survive and thrive over time. Thus, improving economic sustainability on an individual operation will not only influence the producer but also the surrounding community. Cattle producers manage many forms of risk, but price risk has become prevalent due to events such the Tyson Finney slaughter facility fire in 2019 and the COVID-19 pandemic in 2020. Several researchers have evaluated the effectiveness of tools 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 such tools (Hill, 2015). Providing cattle producers with information on how to utilize price risk management tools could contribute to producers making economically sustainable decisions and reduce the impact of economic shocks. The specific objectives of this paper are 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; 2. Determine the attributes of currently available price risk management tools that lead to non-use or fail to mitigate risk; and 3. Provide discussion from producers about ways to improve risk management tools and strategies for cow-calf and stocker producers. In order to achieve the stated objectives, a thorough literature review of price risk management research for cattle was conducted as well as focus group meetings with cattle producers in Tennessee. This publication summarizes the findings of those efforts while two companion publications detail the literature review and the cattle producer focus groups. Though it is not an exhaustive list, Table 1 (next page) summarizes the attributes that lead to use and non-use of price risk management tools in the cattle industry given research findings and Tennessee cattle producer feedback.

Keywords: Farm Management; Marketing; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 4
Date: 2022-07-27
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DOI: 10.22004/ag.econ.322764

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