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The Competitive Position of the Ohio Fed Cattle Industry

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The Competitive Position of the Ohio Fed Cattle Industry 71- 17,956 BERG, James Frederick, 1943- THE COMPETITIVE POSITION OF THE OHIO FED CATTLE INDUSTRY. The Ohio State University, Ph.D., 1970 E conomi cs, agri cultural University Microfilms, A XEROX Company, Ann Arbor, Michigan THIS DISSERTATION HAS BEEN MICROFILMED EXACTLY AS RECEIVED SHE COMPETITIVE POSITION OP THE OHIO FED CATTLE INDUSTRY DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of The Ohio State University James Frederick Berg, B.S., M.S. ******* The Ohio State University 1970 Approved by Adviser Department of Agricultural Economics and Rural Sociology ACKNOWLEDGEMENTS The author of this dissertation first wishes to thank his wife, Raye Carol, for her encouragement, understanding and personal sacri­ fice during the entire graduate program. Special thanks is expressed to my adviser, Dr. Thomas T. Stout for his suggestions and guidance while preparing and writing this dissertation. Sincere appreciation is also due to Dr. Prancis E. Walker for valuable assistance in statistical methods. Also to Lira. Elizabeth Howard and the Department's statistical laboratory clerks who prepared charts and computer materials; to Malinda Brenner and Peggy Lankford for typing the rough draft and to Mrs. Jeanette White for typing the final draft. ii VITA August 25 , 1943 • • Bona - Lima, Ohio 1965 ........... B,S., The Ohio State University, Columbus, Ohio 1966-1967 ..... Research Assistant, The Ohio State University, Columbus, Ohio 1966-1967 ....... Manager Assistant, Tom Tarpy's Market, Tremont Center, Columbus, Ohio 1967 ......... * M.S., The Ohio State University, Columbus, Ohio 1967-1970 ..... Research Associate, The Ohio State University, Coltambus, Ohio FIELDS OF STUDY Major Field: Agricultural Economics Specialized in Economic Theory, Quantative Methods, Marketing, and International Trade iii TABLE) OP CONTENTS ACKNOWLEDGMENTS VITA ....... LIST OP TABLES LIST OP PIGUEES CHAPTER I. INTRODUCTION .................................. Statement of the Problem Objectives II. GROWTH AND ADJUSTMENT IN THE CATTLE INDUSTRY . Concentration in Cattle Feeding State and Regional Adjustment in Cattle Feeding Factors Contributing to Commercial Feedlot Growth Peed grain production Slaughter facilities Feeder cattle supplies Coordination in Feeder Cattle Shipments Operational evidence Cow Numbers - The Base of the Feeding Industry III. TRANSPORTATION ANALYSIS— THE OPTIMUM SHIPMENT PATTERNS FOR FEEDER CATTLE...................... Model for Feeder Cattle Shipments Regional demarcation Delineating of supplies Demand for available calf supplies Transfer costs Program Analysis Initial results The final model CHAPTER Page XV. ECONOMICS OF FEEDLOT OPERATIONS.............. 63 Economies of Scale - Previous Research Results Economics of Smaller Feedlot Operations Discounted labor costs Efficiency measures in feedlots Price considerations V. RECENT PROCUREMENT PATTERNS AND TRENDS, PROCUREMENT COSTS, MARKETING, AND FEEDER CATTLE FINANCING . 97 Cattle Procurement - Interregional Adjustments The Eastern Combelt Ohio procurement Procurement Costs Transportation Shrinkage Buying Marketing Fed Cattle Feeder Cattle Financing VI. RETROSPECT.............. 130 Summary Conclusions Implications and Recommendations APPENDIX A .......................................... 137 APPENDIX .......................................... 142 APPENDIX C ....................... 146 APPENDIX .......................................... 151 APPENDIX E .................................. 155 APPENDIX .......................................... 193 APPENDIX G .............................. 197 BIBLIOGRAPHY ............................... 199 ▼ LIST OP TABLES TABLE Page 1. Changes in U.S. Production of Selected Agricultural Products in Selected Census Years 9 2. Farms and Number of Cattle, Excluding Calves, Sold from Farms Classified by Number Sold per Farm, for the United States, 1954 to 1964 ......... 10 3. Trends in U.S. Feedlots, Numbers by Capacity and Percentage of All Fed Cattle Marketings . ....... 12 4. Number of Fed Cattle Marketings in the East North Central Region, State and Region Totals (1,000 head), and Percentage Change Since I960 14 5. Thousands of Fed Cattle Marketings, Percentage Distribution by States, and Percentage Change by Years, i960 and 1969 .................... .•••• 15 6. Thousands of Bushels of Grain Sorghum (milo) Production, Leading States, Selected Years, and Percentage Change in Production, Selected Periods, 1956-1969 ...................................... 20 7. Federally Inspected Slaughter Plants and Commercial Cattle Slaughter, by Census Regions, I960 and 1969 • • 23 8. Beef Cows Two-Years-Old and Older, Percentage Change, and Percentage of U. S. Total for the U. S. and Selected Regions, I960 and 1970 30 9. Dairy Cows Two-Years-Old and Older, Percentage Change, and Percentage of U. S. Total for the U. S. and Selected Regions, i960 and 1970 31 10. Regional Demarcation and Shipping Points ••..... 40 11. Allocation of Calves Sorted by Supply Regions, Number Shipped, Cost per hundredweight, and Total Cost . 53 vi TABLE Page 12. States with Non-optimal Cost Coefficients of $.60 or Less per Hundredweight for Shipment of Beef Calves Into Ohio for Feeding and of Other States With Non­ op timal Cost Coefficients of $.60 or Less per Hundredweight for These Sources .................. 61 13. Labor and Equipment Feeding 600-Pound Steers 120 Days in Various Sizes of Feedlots, California........... 73 14. Average Daily Nonfeed Costs per-Head F e d ............ 75 15. Total Feeding Costs per Pound of Gain by Type of Cost, Size of Feedlot and Degree of Feedlot Utilization, Texas and Oklahoma, 1966-67 .••••••••.••• 79 16. Total Feeding Costs per Pound of Gain, Rates of Gain, Average Days Fed, and Feedlot Utilization by Number of Cattle Fed, Ohio, 1963-64 and 1968-69 ......... 80 17. Fixed, Variable and Total Costs per Pound of Gain, Ohio, Texas and Oklahoma, Various Cost Studies .... 84 18. Daily Rates of Gain and Feed Cost per Pound of Gain by Feeding Periods, 419 Head of Steers, 1968-69 . 89 19. Daily Rates of Gain and Feed Cost per Pound of Gain by Weights and Sex of Cattle ....... .......... 90 20. Live Finished Beef Cost Differentials for Different Total Gains on Feeder Animals and Cost of Gain Differentials .......................... 92 21. Comparison of January 1 Inventory of Beef Cows and Heifers Two Years Old and Older with Annual Fed Cattle Marketings, Selected States, I960 and 1969 • • 101 22. Origin of Feeder Cattle Shipped Ino Illinois, State Totals, Region Totals and Region Percentages, 1961, 1964 and 1969 .......... 102 23. Origin of Feeder Cattle Shipped Into Ohio, State Total, Region Totals and Percentages, 1961-1969 • • • 104 vii TABLE Page 24* Feeder Cattle Shipped Into Ohio, Percentage of Annual Inshipments by Months, 1961-1969 .••••• H O 25* Transportation Costs for Ohio Inshipments: Bepresentative Transportation Rates and the Transportation Bill for Feeder Cattle Inshipments, 1961, 1965, and 1969 ........................... 112 26* Transportation Costs for Texas Inshipments: Bepresentative Transportation Bates and the Transportation Bill for Feeder Cattle Inshipments, 1962, 1965, and 1967 ........................... 113 27* Actual Shipment Patterns: Estimated Transportation Cost per Feeder Animal Shipped Into Feedlots, Ohio and Texas, 1969 . • ............... 115 28. Optimum Shipment Patterns: Estimated Transportation Cost per Feeder Animal Shipped Into Feedlots, Ohio and Texas, 1968 ..... ....... 116 29. Shrinkage of Feeder Cattle: With Actual and Optimum Procurement Patterns, Ohio and Texas Feedlots . 118 30. Steer and Heifer Prices: Annual Average Price per 100 Pounds Received by Farmers, Selected Regions, Ohio and Texas, 1961-1969 125 31. Feeder Cattle Financing, Survey Response of Commercial Banks (Sample) and Production Credit Associations ........................ ...... 127 32. Number of Feedlots and Number of Fed Cattle Marketings for Two Capacity Groups, by States with Percentages, 22 States, 1969 138 33* Number of Commercial Feedlots and Number of Fed Cattle Marketings by Feedlot Capacity by Regions, 22 States, 1969 ................ 140 viii TABLE Page 34. Federally Inspected Cattle Slaughter by Classifi­ cation and Percentagef with Breakdown of Com­ mercial Slaughter Using the Same Percentage, 1968 ........................................ 145 35. Allocation of Nonfed Cattle for 1968 Optimum Feeder Cattle Shipment Model, Number of Head Allocated and Percentage Allocation for the United States............ 149 36. Inshipments of Cattle from Canada: Allocation of Total Inshipments to Regional Origins and by Intended Use, 1968 .................. 154 37. Transportation Model:Optimum Calf Shipment Patterns for Slaughter and Feeding Purposes, and Non-optimal Shipment Costs, 1968 ...«•.. 156 38. Schedule of Breakeven Prices for 67 Percent Net Gain on Feeder Animals at Selected Feeder Cattle Prices and Feeding Costs per Pound Gain ...••• 194 39. Schedule of Breakeven Prices for 100 Percent Net Gain on Feeder Animals at Selected Feeder Cattle Prices and Feeding Costs per Pound Gain ...... 195 40. Schedule of Breakeven Prices for 150 Percent Net Gain on Feeder Animals at Selected Feeder Cattle Prices and Feeding Costs per Pound Gain ••••.. 196 ix LIST OP FIGURES Figure Page 1. Trade problem with perfectly inelastic regional supply and demand curves. .............. 36 2. General alternative use flow chart for calves produced in tbe United States, from birth to slaughter. .... 38
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