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Canada's Beef Cattle Industry: Shocks, Cycles and Loan Guarantees

  • Author / Creator
    Twine, Edgar E
  • This dissertation examines three issues crucial to the competiveness of Canada’s beef cattle industry. The first study undertakes an ex post analysis of the impact of the U.S. country of origin labeling (COOL) law on U.S. imports of Canadian beef and cattle. The study employs a test of structural change that is able to endogenize break points and one that is able to detect end-of-sample structural breaks. Results suggest that COOL has led to significant reductions in U.S. imports of Canadian beef and cattle. The second study examines the impacts of the appreciation of the Canadian dollar relative to the U.S. dollar and feed price escalation on Canadian cattle cycles. It estimates Canadian beef cattle cycles using total cattle inventories, beef cow inventories, beef supply, and beef prices. Spectral decomposition of the variables reveals ten-year cycles in total cattle inventories, beef cow inventories and beef supply, and an eight-year cycle in prices. Modeling exchange rate appreciation and feed price escalation as pure jumps, the study finds significant impacts of both shocks on total inventories, but beef supply appears to have been impacted only by exchange rates. A spectral comparison of the pre- and post-shock periodogram of beef supply reveals a 58% reduction in the peak amplitude of the beef supply cycle. The third study deals with Alberta’s Feeder Association Loan Guarantee Program. The purpose is to determine the extent of the risk exposure faced by commercial banks participating in the program, the value of the loan guarantee provided to cattle feeders through the program, and the subsidy embodied within the program. Enterprise budgeting is combined with Monte Carlo simulation to capture production and price risk. A consolidated measure of risk is obtained and fed into option pricing models to estimate the value of the loan guarantee. Results suggest that feeding cattle is, indeed, a risky undertaking, and the resulting risk exposure to lenders is significant, especially with respect to backgrounding. Also, the study finds the price of the loan guarantee to be 4% to 5% of the loan amount, which is sufficient to offset the subsidy inherent in the program.

  • Subjects / Keywords
  • Graduation date
    2014-06
  • Type of Item
    Thesis
  • Degree
    Doctor of Philosophy
  • DOI
    https://doi.org/10.7939/R3K64B20R
  • License
    This thesis is made available by the University of Alberta Libraries with permission of the copyright owner solely for non-commercial purposes. This thesis, or any portion thereof, may not otherwise be copied or reproduced without the written consent of the copyright owner, except to the extent permitted by Canadian copyright law.
  • Language
    English
  • Institution
    University of Alberta
  • Degree level
    Doctoral
  • Department
    • Department of Resource Economics and Environmental Sociology
  • Specialization
    • Agricultural and Resource Economics
  • Supervisor / co-supervisor and their department(s)
    • Rude, James (Resource Economics and Environmental Sociology)
  • Examining committee members and their departments
    • Swallow, Brent (Resource Economics and Environmental Sociology)
    • Rude, James (Resource Economics and Environmental Sociology)
    • Unterschultz, Jim (Resource Economics and Environmental Sociology)
    • Anders, Sven (Resource Economics and Environmental Sociology)
    • Jeffrey, Scott (Resource Economics and Environmental Sociology)
    • Kerr, Bill (Bioresource Policy, Business and Economics, University of Saskatchewan)