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Livestock Marketing

Livestock Marketing. Annie’s Project February 6, 2007 Coweta 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

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Livestock Marketing

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  1. Livestock Marketing Annie’s Project February 6, 2007 Coweta Oklahoma

  2. 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

  3. Livestock Marketing • Every operation should develop a marketing plan. • To develop a marketing plan, producers must answer the 3 W’s • What? • Where? • When? W's

  4. 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.

  5. 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

  6. Livestock Marketing Channels Regional Market Local Market Producer Processors Trader/ Middleman Purveyors Cooperatives Retail Food Service Consumer

  7. 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

  8. Oklahoma Cattle Seasonal Price Chart

  9. Oklahoma Goat Seasonal Price Chart

  10. Basis, What is it? Basis is the difference between the local cash price and the Chicago Mercantile Price. OKC Steer Price MINUS CME Feeder Cattle Price EQUALS Basis

  11. CME Feeder Cattle Futures PriceNovember 16, 2009 OPEN HIGH LOW LAST SETT CHGE NOV09 93.50 93.50 93.10 93.10 93.10 -0.05 JAN10 92.70 92.875 92.05 92.375 92.375 -0.20 MAR10 93.65 93.65 93.10 93.30 93.30 -0.30 APR10 94.55 94.55 94.15 94.35 94.35 -0.20 MAY10 95.50 95.50 95.075 95.15 95.15 -0.35 AUG10 97.20 97.20 97.05 97.10 97.10 -0.10 SEP10 97.90 97.90 97.90 97.90 97.90 -0.325 OCT10 98.975 98.975 98.975 98.975 98.975 -0.025

  12. OKC 5-Year Average Basis

  13. Risk Management • The use of different management techniques in order to reduce the amount of risk. • Types of Risk • Production The uncertainty of weather, disease, insects, weeds and infertile breeding stock. • Price Fluctuations in price due to unforeseen events. • Financial Uncertainty of operations ability to pay off debts, future interest rates, future borrowing ability and needs, and etc.

  14. Risk Management Tools • Production 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

  15. Value Added Opportunities • Preconditioning • Cooperative marketing/purchasing • Retained ownership through custom feeding • Strategic alliances • Niche Markets • Organic • Natural

  16. Summary • Every livestock operation needs to develop a marketing plan. • Remember the 3 W’s • What • Where • When • There are risk management tools available. • Be sure to investigate value added opportunities.

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