Factor Price Disparity and Retained Ownership of Feeder Cattle: An Application of Feedlot and Carcass Performance Data to Farm-Level Decision Making

Abstract

In this study, we used farm-level data from a university feed-out program to evaluate how the value of feeder cattle ultimately realized through finishing and grid pricing differs from their market value at public auction. Consistent with the theory of factor price disparity, results indicate that significant risk premiums exist in the feeder cattle market. Producers of cattle with known feedlot performance, carcass potential, or both might be better off retaining ownership of their calves or marketing them in a way that communicates the information that is known about their potential performance directly to the buyer.