SOUTHERN JOURNAL OF AGRICULTURAL ECONOMICS DECEMBER, 1973 EVALUATION OF A QUANTITATIVE PROCEDURE TO SELECT AMONG ALTERNATIVE MARKETING STRATEGIES TO REDUCE PRICE RISKS OF STOCKER OPERATORS*

Producers within the cattle industry are faced money he can afford to lose increases, his risk level with three major types of risks: (1) risks of losses in approaches one. quality; (2) risks of quantity losses; and (3) losses The criterion used to select among the alternative resulting from unfavorable changes in cash prices. buying and among the alternative selling strategies is Quality and quantity risks are physical risks that can based upon the forecast interval computed using a be dealt with through managerial techniques, one-tailed probability distribution. The following adoption of new technology, and the use of fire, formula is used to calculate the forecast interval [2]: storm, and theft insurance. The risk associated with 1 unfavorable price changes does not lend itself to an (1) D =C'B +,d.f. s 2 [ + C'(X'X)-C]} 2 insurance approach. Producers must, therefore, where become speculators in the cash market or choose to D = probability interval, employ marketing strategies designed to transfer price C ' = row vector of the observed independent risks to other market functionaries. variables used to predict the average It is the purpose of this paper to report on the monthly price for month t, evaluation of several marketing strategies permitting B = column vector of the estimates of th