This paper evaluates producer risk management decisions accounting for government provided risk management programs. An analytical model is developed to investigate the effect of crop insurance and Farm Bill program choice on producer demand for hedging in the futures market. Simulation results show government programs has potential to alter the optimal hedging decisions of producers. Yield protection insurance is found to complement hedging in most locations, while revenue insurance is generally found to substitute for hedging. Farm Bill programs are found to have varying effects based on price level.

One potential tool fertilizer dealers and producers have to protect themselves against fertilizer price risk is the fertilizer swaps market. Swaps usually settle using a floating variable price that is determined by an index of cash prices. This paper calculates hedge ratios and hedging effectiveness of urea and DAP (diammonium phosphate) swaps that settle using The Fertilizer Index with various spot price locations from the United States and internationally. Results show that urea and DAP swaps that settle using The Fertilizer Index perform poorly as a hedging tool over short time periods. As the hedging horizon increases, the hedging effectiveness of swaps improves.

There is public pressure to reduce antimicrobial use in livestock production. Metaphylaxis usage raises special concern as it is given to a whole group of animals. The objective of this research was to determine the difference in cattle productivity and health (average daily gain, death loss, etc.) between cattle given metaphylaxis and those to which it was not given. Observational data were provided by a commercial feedlot in the Southern Great Plains region of the U.S.A. with an operating capacity >50,000 head. Cattle that received metaphylaxis treatment had substantially poorer health outcomes than those that did not. Cattle were more likely to have been given metaphylaxis treatment if they had a lower weight, were from a sale barn, or had been shipped long distances. Propensity score matching was used in an attempt to estimate the effect of metaphylaxis treatment on feedlot cattle. Propensity score matching was unable to overcome the endogeneity issues present in the data (endogeneity results from the animals being more likely to benefit from the treatment being the ones who received it). The dataset had information on cattle weight, state of purchase, and whether or not the cattle were from a sale barn, and so the feedlot must have based the treatment decision on information that was not recorded and therefore not included in the dataset. As an observational study, there are limitations in addition to data limitations, such as the possibility that the feedlot studied might not be representative of others. Even though the effect of metaphylaxis was not identified, the fact that it was unidentifiable supports the argument that the feedlot did treat the animals most likely to need metaphylaxis treatment. This should temper some fear of metaphylaxis treatment being overused and of antimicrobials being given needlessly.

Feeder cattle markets suffer from asymmetric information as sellers have information that buyers do not. Since buyers cannot fully determine the quality of feeder cattle, they pay for an “average” quality that is only adjusted by observable characteristics. A contract design is introduced that allows buyers to differentiate producers by offering a menu of contracts. The offered contracts contain a premium that is paid when a lot of cattle reach a target performance indicator, such as average daily gain. Results suggest the contract can successfully allow buyers to purchase high‐quality cattle, avoiding purchasing low‐quality cattle.

No abstract