Marketing nuts and bolts
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MARKETING NUTS AND BOLTS
Meade County Extension Educator
STEPS TO SUCCESSFUL MARKETING
1. Current Market Conditions
2. Marketing Nuts & Bolts
3. Management Tools
4. Marketing Plan Development
CURRENT MARKET CONDITIONS
Cash Markets Crops & Livestock Use graphs and show cycles
MARKETING NUTS AND BOLTS
Lingo Commodity Markets
Contract Specs Hedging Options Basis
Reports WASDE; COF
Livestock Insurance Programs Feed Finder Highlight current events
MARKETING PLANS 4
1. Know Market Tools
2. Consider Market Opportunities
3. Develop a Marketing Plan
4. Monitor the Plan throughout the Year.
1. Production Level and Risk-
Write down what you reasonably expect to market. Be reasonable about death loss and pounds of animal marketed.
2. Financial Situation-
Note any major financial implications for the plan.
3. Price Targets-Translate financial goals into prices.
Use the breakeven price as a benchmark. Have targets of “needs” “wants” and “hopes”
4. Fundamental Outlook-
Identify some known's of the market. What are seasonal patterns and trends.
5. Tools and Strategies-
State when you will sell, how much you will sell and by what method.
6. Evaluation –Maintain a history of performance.
Cattle Backgrounding Game
GAME OBJECTIVES Determine a cost of production Follow a marketing plan Utilize tools such as forward
contracting, hedging, livestock risk protection insurance
WHAT THOUGHT GOES INTO
Enterprise Backgrounding Date October 1. Production Level and Risk-
*150 head of 500 lb. steers. Plan to market animals at 850 lbs. on March 15.
2. Financial Situation- *Reviewed financial statements-cash flow is good*Need to get help with financial analysis
3. Price Targets-Translate financial goals into prices. *Breakeven $93 cwt is a need; Want-$100; Hope-$105
4. Fundamental Outlook- *Volatility of economy *COOL regulations*Trade with foreign markets *Expect feed and oil costs to rise again
5. Tools and Strategies-1. Calculate LRP and consider locking in2. Sell 1 feeder contract and offset when sell in cash market3. Forward Contact 50% of calves if price is above $93.00
6. Evaluation –look how plan worked-what strategies do I need to change?
COST OF PRODUCTION
Calf Cost $500
Death Loss $20/head
Feed Cost $210/head
Do You Know Your COP?
OCTOBERCalf Weight 570 Cash Market $106.00
March Feeder Cattle Futures $98.52
March Corn Futures $ 4.08
Last week, cash fed cattle prices managed a slight gain, a notable improvement over the previous few weeks. Live Cattle futures posted their best week in quite some time. Feeder Cattle resumed their upward move and finished the week with solid gains on Friday. Corn futures also moved substantially higher this week. On Tuesday, USDA released a revised WASDE report. The revised data made the October report considerably more bullish for corn than had originally been the case. The corn production estimate was revised down to 12.033 billion bushels. The Choice cutout was reported at $142.21, up $0.69 from last Friday. The Select cutout was $136.32, up $1.28 from last week.
NOVEMBERCalf Weight 630 Cash Market $101.00
March Feeder Cattle Futures $95.92
March Corn Futures $3.97
Cash fed cattle were generally $2 to $4 higher. Prices ranged from around $90 in Iowa Minnesota to $94 in the Southern Plains and Colorado. Live Cattle futures moved lower this week as the market appeared to focus exclusively on the general economy and the performance of the stock market, which was, pretty lousy. Wholesale beef prices surged this week, and supply side fundamentals are largely supportive of prices. Feeder cattle futures contracts gave up quite a bit of ground this week. With Live Cattle falling and corn more-or-less holding its own.
DECEMBERCalf Weight 690 Cash Market $97.50March Feeder Cattle Futures $93.23March Corn Futures $3.808Forward Price (deliver in Feb). $90.00
Trading ranged from active in the Northern Plains to inactive in the Southern Plains this week. Cattle slaughter was pretty light compared to last week, Feeder cattle futures largely went along with Live Cattle this week, also posting big gains. Corn futures started the week higher on rising oil futures and a falling dollar. The Choice to Select spread is narrowing, likely due to lighter retail demand for high priced Choice cuts.
JANUARYCalf Weight 750 Cash Market $98.75March Feeder Cattle Futures $92.97March Corn Futures $3.904 Forward Contract (deliver in Feb) $ 93.20
Live Cattle futures had a pretty rough week. Feeder cattle futures were pretty quiet, receiving little direction from outside markets. Corn futures traded largely on the influence of outside markets (equities and oil). consumers are opting for less expensive roasts and hamburger at the retail meat counter. Packers will have little incentive to pay up for Choice cattle when relatively more of the value of the carcass is in the end meats. On Friday, USDA released the monthly Cattle on Feed report. All of the numbers in the report were on the bullish side of pre-report estimates.
Calf Weight 810 Cash Market $87.75March Feeder Cattle Futures $94.47 March Corn Futures $3.632 Forward Contract (for March delivery) $93.75
Live Cattle finished the week on a weak note, largely reflecting concern over cash price prospects. Weaker wholesale beef prices make another strong cash market finish less likely this week. Feeder cattle futures moved pretty much in tandem with Live Cattle this week. Early-week gains were, for the most part, given back by the end of the week despite the fact that corn slid slowly lower for about the whole week. Uncertainty related to outside markets continues to weigh on all commodities right now.
MARCHCalf Weight 870 Cash Market $87.75 March Feeder Cattle Futures $92.20 March Corn $3.53
HOW DID YOU DO? Figure Total Cash
1.Calf weight x price x # of head= Total Cash.
2. Add up all Total Cash
3. Total Cash Divided by # of head sold= $’s per hd.
1. Sold contracts - Bought contracts= (loss/gain)
2. Take (gain/loss) x 5.5cwt= amount per head
Subtract total Cash-Futures Gain/loss
Subtract Breakeven= Total Revenue per Hd.
ACTIVITY WRAP UP
Cost of Production-Do you know yours?
Basis-What did you learn? Marketing plans-Did you use it? Marketing Options-Do you use