Economic viability of a commingled/backgrounded cattle sale

Due to the character of the original source materials and the nature of batch digitization, quality control issues may be present in this document. Please report any quality issues you encounter to digital@library.tamu.edu, referencing the URI of the item.Includes bibliographical references (leaves 94-97).Issued also on microfiche from Lange Micrographics.Focusing on the increasing emphasis of value added to the beef industry, and the many different techniques being suggested, an economic investigation into the merits of such marginal programs is warranted. One such attempt at value added is the Premium Stocker Sale developed by the Jordan Cattle Auction in San Saba, Texas. This premium sale features the commingling of different producers' cattle based on similar weights, quality, and general breed types. Producers registered to participate in the sale must also background the cattle according to TEX VAC45 guidelines adopted and certified by the auction company. It is hypothesized that the commingling of cattle and the certified backgrounding program create a more valuable lot of cattle when compared to the price of cattle sold at traditional auctions in Texas, which sell individual producer's cattle separately, and only a few head at a time. This research focused on three main objectives. The first objective was to compare prices received at the premium sale in San Saba with those received at traditional auctions in Texas, then test for a statistical difference. The second objective was to use previously developed hedonic pricing models to test if certain characteristics of a lot of cattle impacted the price received. The third objective of the study was to develop a methodology for calculating the full cost of backgrounding cattle in order to participate in the premium sale. This full cost calculation of backgrounding was then compared to the price difference found at the premium sale to test whether or not the added value covered the corresponding added costs. A significantly different premium was found for cattle sold at the commingled/backgrounded sale in San Saba when compared to the Texas Combined Weighted Average. Statistical analysis found that the type of breed, color, muscle score, sex, and weight of the lot, along with the lot's size, impacted the sale price of a lot of cattle. Lastly, it was found that pro forma budgeting is needed due to the variation in the size of premiums, and that for the short period considered feeding margins will for the most part be negative, requiring a positive marketing margin in order for preconditioning to realize a positive net return