Net Revenue Differences for Sellers in Online and Traditional Swine Auction Markets
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Publisher:The Ohio State University
Series/Report no.:The Ohio State University. Department of Animal Sciences Honors Theses; 2010
According to common sense and economic theory, farmers, along with all other vendors, are in continual search for any increment available to augment profit margins and sustain competitiveness. As a result, novel sales techniques have arisen, one of which is online marketing. The focus of this thesis is the hog sector. Some means of electronic livestock sales have shown to have a positive effect on producer revenue presumably because competition is boosted via geographic enlargement of buyer pools. Nevertheless, most historic electronic agricultural markets were established merely for academic study and were subsequently disbanded. Whether or not an online venue will generate higher profits for livestock producers today remains unknown. The core objective of the proposed research is to detail what, if any, net revenue difference there is for livestock producers in online and offline auctions. Utilizing the market for pigs sold for show ring competitions, I will methodically document price dissimilarities between online pig auctions hosted by The Wendt Group, Inc. and regional live sales in Ohio and Indiana. The experiment will follow a matched pair design in order to minimize potentially confounding variables, such as size, breed, sex, age, seller, and quality. Sample data from 78 hogs (39 from each venue), matched on the characteristics listed above, was collected and matched pair net revenue differences were established. Data was statistically analyzed using a standard normal z-test and the non-parametric Wilcoxon test. A mean (n=39) matched pair net revenue difference of 184.8 established a noticeable online advantage. One producer provided the bulk of the matched pairs (n=27) and provided a statistically sound difference of 360.3; the probability that this difference is different than zero is 0.9512 according to the Wilcoxon test. The online sale venue, on average, yielded higher net revenue margins per head for swine producers. Online venue seller benefit and greater auction traffic can help substantiate historic claims that a rise in electronic transaction expenses is easily compensated for via superior bidder competition. Hog farmers may increase profit dividends by 20% through the use of online auction services which may improve industry efficiency and competitiveness. Further study is warranted to better link these conclusions to the financially troubled commercial swine industry.
This research has been supported by funds appropriated by the Ohio General Assembly to The Ohio State University, Ohio Agricultural Research and Development Center.