Annie’s Project February 6, 2007 Coweta Oklahoma 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 The process of producers monitoring input and output market conditions, managing market risk and controlling the movement of products into the market

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

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 Auction Barn Cooperatives 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 Regional Market Local Market Producer Processors Trader/ Middleman Purveyors Cooperatives Retail Food Service Consumer

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

Oklahoma Cattle Seasonal Price Chart

Oklahoma Goat Seasonal Price Chart

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

CME Feeder Cattle Futures Price January 31, 2007 OPEN HIGH LOW LAST SETT CHGE MAR07 94.850 96.000 94.400 95.850 95.850 +1000 APR07 96.700 98.000 96.500 97.950 97.950 +975 MAY07 97.650 98.750 97.500 98.750 98.725 +775 AUG07 99.800 100.650 99.700A 100.650 100.625 +675 SEP07 99.600 99.700B 99.300 99.400 99.400 +150 OCT07 99.450 99.700B 99.300A 99.700B 99.700 +350 NOV07 99.100 99.100 99.100 99.100 99.100 +600 JAN08 97.500 98.000B 97.500 98.000B 98.000 +1000

OKC 5-Year Average Basis 400-500# 500-600# 600-700# 700-800# January 25.89 13.27 3.82 0.20 February 31.01 19.76 8.17 2.67 March 33.22 21.87 10.96 2.13 April 32.30 21.55 12.24 3.75 May 26.11 18.73 10.39 2.60 June 24.48 15.88 9.53 3.41 July 24.37 14.66 9.12 3.62 August 22.07 12.26 7.39 2.73 September 18.38 8.98 6.87 1.97 October 18.59 5.62 3.92 1.35 November 22.94 11.89 5.13 2.92 December 28.48 14.58 6.23 3.79

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.

Risk Management Tools Production Risk Price Risk Financial 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 Preconditioning Cooperative marketing/purchasing Retained ownership through custom feeding Strategic alliances Niche Markets Organic Natural

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.