Livestock Marketing

Annie’s ProjectFebruary 6, 2007Coweta Oklahoma

What is Marketing?

Definition:A term used to cover those activities of firms associated with the sales and distribution of product(s). MIT Dictionary of Modern Economics

The process of producers monitoring input and output market conditions, managing market risk and controlling the movement of products into the market

Livestock Marketing

Every operation should develop a marketing plan.

To develop a marketing plan, producers must answer the 3 W’s What? Where? When?

What?What product is being produced?

Market animals Size, weight, sex, breed

Replacement animals Age, open or bred, breed, sex

Niche markets All natural, organic, etc.

Knowing what product is going to be sold helps determine an operations market potential.

Where? Off of the farm

No commission or transportation costs Need to know current market situation Weight?

Auction Barn Easiest No problems collecting money May not receive complete worth of livestock

Cooperatives Able to group like kind and weight Usually receive higher prices Must of right kind and type to participate

Livestock Marketing Channels

Producer

Consumer

Trader/Middleman

Processors

Purveyors

Cooperatives

Food Service

Retail

Local MarketRegional Market

When?

Most livestock prices have a seasonal pattern. Prices are higher and lower than average for

certain types and weight groups during certain times of the year.

These changes are generally caused by: Increased demand

Holidays Summer BBQ season

Decreased supply Production cycles

500-600# Steers OKC 1973 to Present

20

40

60

80

100

120

140

SEASONAL PRICE INDEX -- UTILITY COWSSouthern Plains, 1999-2008

0.80

0.85

0.90

0.95

1.00

1.05

1.10

1.15

Jan Mar May Jul Sep Nov

Index

Max.Index

Avg.Index

Min.Index

SEASONAL PRICE INDEX -- FED STEERSSouthern Plains, 1999-2008

0.85

0.90

0.95

1.00

1.05

1.10

1.15

1.20

Jan Mar May Jul Sep Nov

Index

Max.Index

Avg.Index

Min.Index

SEASONAL PRICE INDEX -- FEEDER STEERS700-800 Pounds, Southern Plains, 1999-2008

0.85

0.90

0.95

1.00

1.05

1.10

1.15

Jan Mar May Jul Sep Nov

Index

Max.Index

Avg.Index

Min.Index

SEASONAL PRICE INDEX -- STEER CALVES500-600 Pounds, Southern Plains, 1999-2008

0.85

0.90

0.95

1.00

1.05

1.10

1.15

Jan Mar May Jul Sep Nov

Index

Max.Index

Avg.Index

Min.Index

Oklahoma Cattle Seasonal Price Chart

0.9

0.92

0.94

0.96

0.98

1

1.02

1.04

1.06

JAN

FEB

MA

R

AP

R

MA

Y

JUN

JUL

AU

G

SE

P

OC

T

NO

V

DE

C

Ave

rage

Pri

ce In

dex

4/500 LB

6/700 LB

7/800 LB

FED

COWS

Oklahoma Goat Seasonal Price Chart

80%

85%

90%

95%

100%

105%

110%

115%

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

20-40 lbs. 40-60 lbs. 60-80 lbs.

Basis, What is it?

Basis is the difference between the local cash price and the Chicago Mercantile Price.

OKC Steer PriceMINUS

CME Feeder Cattle Price EQUALS

Basis

CME Feeder Cattle Futures PriceNovember 16, 2009

OPEN HIGH LOW LAST SETT CHGE NOV09 93.50 93.50 93.10 93.10 93.10 -0.05JAN10 92.70 92.875 92.05 92.375 92.375 -0.20MAR10 93.65 93.65 93.10 93.30 93.30 -0.30APR10 94.55 94.55 94.15 94.35 94.35 -0.20MAY10 95.50 95.50 95.075 95.15 95.15 -0.35AUG10 97.20 97.20 97.05 97.10 97.10 -0.10SEP10 97.90 97.90 97.90 97.90 97.90 -0.325OCT10 98.975 98.975 98.975 98.975 98.975 -0.025

400-500# 500-600# 600-700# 700-800#

January 28.52 16.16 5.25 0.10

February 33.81 22.30 9.85 1.96

March 34.83 24.51 13.48 1.87

April 32.66 22.64 12.78 3.00

May 27.80 19.45 10.78 2.17

June 24.45 15.26 8.44 2.55

July 23.20 13.48 7.35 2.00

August 20.47 12.30 6.75 1.78

September 20.22 10.54 6.72 1.62

October 21.21 9.20 4.92 1.47

November 26.96 14.51 5.51 3.07

December 26.96 14.15 5.04 2.26

OKC 5-Year Average Basis

Risk ManagementThe use of different management techniques

in order to reduce the amount of risk.Types of Risk

ProductionThe uncertainty of weather, disease, insects, weeds and infertile breeding stock.

PriceFluctuations in price due to unforeseen events.

FinancialUncertainty of operations ability to pay off debts, future interest rates, future borrowing ability and needs, and etc.

Risk Management ToolsProduction Risk

Keep up to date on the latest production practices and never be afraid to seek more information

Advanced input pricing (Booking ahead)Price Risk

Futures contracts and options Forward pricing contracts

Financial Risk Keep good records Keep up to date on all financial statements and

reports

Value Added Opportunities

PreconditioningCooperative marketing/purchasingRetained ownership through custom feedingStrategic alliancesNiche Markets

OrganicNatural

Summary

Every livestock operation needs to develop a marketing plan.

Remember the 3 W’sWhatWhereWhen

There are risk management tools available.Be sure to investigate value added

opportunities.