The Economic Analysis of Corn Grain Optimization and Price Variation for Cattle on Feed in Texas

Abstract

Cattle placed on feed is a practice to maximize the amount of meat produced before being sent to slaughter, which has become a major agricultural industry. The optimization of input quantities, especially corn, is crucial to maximize production efficiency and ultimately profit. The objective of this research is to determine the optimal corn grain production rate for cattle on feed in Texas and estimated profit maximization under various price ratios for corn grain and live cattle. Utilizing data from various United States Department of Agriculture (USDA) sources, various different input production levels and prices were collected. Statistical Analysis System (SAS), procedures were used to estimate the different production functions. Sensitivity analysis were performed for the optimal production of corn grain rate, and consequent profit under various combinations of corn and live cattle prices for the four different functions. Additionally, a continuous form curve for optimal corn grain production rates under various price ratios was developed. Results indicated that the cubic model was the most accurate based upon the R2 value. However, the continuous form model created for the sensitivity analysis concluded that the quadratic was the most accurate model under the different price ratios. The results of the study can be a useful tool for the decision-making process for producers and policymakers.