A stochastic budget simulator and generalized stochastic dominance are used to compare
the risk management properties of grazing contracts to futures and option contracts.
results show that the risks of backgrounding feeder cattle are reduced significantly
pasture owners in a grazing contract. However, the risks of the cattle owner in a
contract are not significantly reduced. The results also show that generally risk
pasture owners prefer grazing contracts to integrated production when traditional
is used to manage price risks. In addition, grazing contracts compare favorably with
option contracts for some pasture owners.