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Marketing agreements between meatpacking and cattle feeding firms have created concerns about their effects on fed cattle prices. Profit-sharing marketing agreements were imposed onto a simulated fed cattle market. Price level and variability differences with and without agreements, between agreement participants and nonparticipants, during agreement and nonagreement periods, and between participants receiving and not receiving a monetary incentive were evaluated. Prices and variability for nonagreement cattle were higher during the agreement periods. Marketing agreement participants realized lower, less variable prices than nonparticipating firms. Monetary incentives did not affect price levels but increased price variability. Copyright 1999, Oxford University Press.

A feeder-calf price model is estimated which incorporates elements of break-even budget analysis, including estimates of placement weights, slaughter weights, ration cost, and feed-conversion rates. From this model, a corn price multiplier is calculated which quantifies the corn/feeder-calf price relationship. Because the multiplier includes information on cattle weight, feed conversion, and ration cost, it also provides insight into how feeding programs are altered in response to corn price changes. Changes in feeding programs which occur in response to corn price changes are illustrated with dynamic simulation based on weight, ration cost, and price models presented here.

Variable beef-breeding herd sizes are found to be optimal given cyclical beef prices. Traditional replacement theory does not allow variable firm size because unequal investment (replacement) and disinvestment (culling) rates are not possible. If firm size changes, cost of production per unit endogenously changes given a u-shaped cost curve. Optimal investment and disinvestment rules for variable firm size are developed based upon the firm's cost curve and discounted net revenue flows for a finite rolling planning horizon. Current and future investment and disinvestment decisions are linked by their mutual effect on firm size and hence production cost per unit.

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Price discovery is a concept used frequently but seldom defined. Thomsen and Foote defined price discovery in 1952 as the process of buyers and sellers arriving at a transaction price for a specific quantity and quality of a commodity or product at a specific time and place. Their definition allows focusing on many interrelated components of the pricing process, and numerous topics may be categorized as price discovery research. Examples include studies of transaction prices and relationships with underlying supply and demand determinants; price relationships and dynamics between and among vertical stages in the marketing channel; spot versus forecasted or futures market prices; price impacts associated with market information, especially public reports; price and product characteristic relationships; spatial and temporal price patterns and dynamics; and price impacts associated with market structure and behavior changes.Price discovery research has become an increasingly important topic because of structural and behavioral changes in agriculture, both horizontal and vertical, and the resulting potential price and market information impacts. Structural and behavioral changes in meatpacking and related stages in the livestock-meat subsector have raised questions about price discovery for various species and classes of livestock (Purcell and Rowsell).

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The opportunity to present a presidential address provides a rare and unique opportunity. It is perhaps the only time one gets to speak to the profession without your material either being reviewed and corrected before its presentation, or reviewed and corrected by a discussant after your presentation. Indeed the freedom that a presidential address offers takes a little getting used to, but it provides a wonderful opportunity to express one's biases. To you, the members of the profession who took the risk to allow me this opportunity, let me say thank you. I have chosen to use this opportunity to address a topic that I think provides one of the most exciting and potentially productive challenges our profession will face in our lifetimes, that is “The Dawning of the Age of Dynamic Theory.”