Economics of Pasture-Raised Beef: An Application of @RISK and Stochastic Modeling

J. Evans and G. D'Souza (USA)


Value added, pasture, beef, stochastic modeling


Direct sales of value-added or niche products is one of the best strategies to enhance on-farm profitability and, possibly, economic development in depressed areas such as the US Appalachian region (the study area). Factors driving the demand for such products include their local nature and associated freshness coupled with perceived health and environmental benefits. An abundant natural resource base and comparative advantage in pasture production make one such specialty product, pasture raised beef, a potentially lucrative income source for Appalachian farm households. In this analysis, stochastic budgeting is utilized to better understand relative profitability and economic risk levels associated with conventional and pasture-raised beef production practices. We employ the software package @RISK and a combination of primary and secondary data in estimation. Results suggest that despite significantly higher establishment and management costs, pasture raised beef production and direct marketing of these specialty products yields higher profit levels and lessened economic risk than conventional production and marketing protocols, even in seasons of poor animal and pasture performance. Implications of this research are derived for the industry, policy makers, and researchers.

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