A risk efficiency analysis of backgrounding and finishing steers on pasture in Saskatchewan, Canada
2004
Perillat, B.J. | Brown, W.J. | Cohen, R.D.H.
This paper combines an agricultural production decision support tool, GrassGro, with economic risk efficiency theory to examine several cattle feeding options that include various grazing systems for three climatic environments in Saskatchewan, Canada. Historical weather data were used to simulate a distribution of forage and cattle production data for each of several grazing systems during a 21-year period, 1978-1998. Price variability was included by varying year 2000 prices using historical price margin changes between the buying and selling weights of cattle. The risk efficiency analysis was completed using the Mean Standard Deviation (MSD) framework, and stochastic dominance principles. Results of the study suggested that feeding systems, which included grazing, were economically competitive with traditional feedlot feeding systems and grain farming. Finishing cattle on pasture with the addition of a barley supplement was an attractive option, especially when high pasture productivity can be achieved. In all locations, more intense systems that included pasture fertilization and provision of an energy supplement, improved production and risk efficiency. Although the average net returns of all these feeding simulations were negative, the returns of traditional grain crops were even more negative. It is these negative returns in grain operations that lead to the incentive for producers to diversify into cattle production. Despite the negative net returns, the cash flow (range -$15.59 to $407.54 ha-1) was mostly positive in all three locations.
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