Optimal production/marketing risk strategies for cattle ranches in the Texas Southern Plains
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Based on the results of this study, it was concluded that variations in cattle prices and foraoe production, even when they can be predicted, affect ranch net returns substantially. When faced with uncertainty, the rational ranch manager maximizes expected ranch profit by pursuinq a high price-high forage strategy. However, a more conservative ranch plan, i.e., based on the occurrence of normal levels of cattle prices and forage yield carries a lower risk and slightly less net income. Additional information, if available, may enhance the level of expected ranch profit; however, ranch plan decisions based on previous year's observations did not prove to be superior to the ranch plans based on unconditional price level and forage production level probabilities. It was recommended that a different approach be used to obtain posterior probabilities of cattle prices and foraqe conditions.