1. Marketing Original Power Point Created by Casey Osksa
Modified by Georgia Agricultural Education Curriculum Office
June 2002

2. What is Marketing?
All the economic activities involved in preparing and positioning the product for the final consumer

3. What is Utility?
Customer satisfaction
consumer needs

4. Form Utility In what form is a product available Each step adds value
Whole chicken
Chicken parts
Cooked chicken
Each step adds value

5. Place Utility
Where is a product available
Convenience

6. Time Utility
When is a product available

7. What percentage of the final product does the producer receive?
Dairy farmer = 34% for milk
Grain products = 9%

8. What is the Law of Demand?
At any point in time, the rational consumer will take more only at a lower price.
Ex: How many hamburgers would you buy at $2?
How many hamburgers would you buy at $1?
How many hamburgers would you buy at 50 cents?
How many hamburgers would you buy at 25 cents?

9. Law of Demand
Demand
Price
Quantity

10. What is the Law of Supply?
Producers are willing to offer more only at a higher price
Ex: How many acres of wheat will you plant if wheat is worth $2 / bu.?
How many acres of wheat will you plant if wheat is worth $4 / bu.?
How many acres of wheat will you plant if wheat is worth $8 / bu.?

11. Law of Supply
Supply
Price
Quantity

12. Law of Supply & Demand
Supply
Price
Demand
Quantity

13. What is Equilibrium Price?
Price is determined where supply and demand curves intersect

14. Law of Supply & Demand
Supply
Price
Demand
Quantity

15. What is Price Discovery?
The process of searching for the Equilibrium Price
Many things involved that can alter supply and demand
Government incentives
Weather
World Trade
Surplus

16. How does change in supply affect price, if demand stays the same?
Quantity

17. Economies of Size
Within Limits, larger businesses (farms) can produce at a cheaper cost per unit of production
Eventually, as business becomes too large, costs increase

18. Futures Contract
Futures Contract = a contract calling for delivery of a carefully described commodity at some later time
Not intended for actual delivery of commodity, but price discovery for later period
Method of transferring risk of cash market of producer to speculator in futures market

19. Basis The difference between cash market and futures market
Cash - Futures = Basis
usually negative

20. Forward Pricing
Forward Contract = a contract which locks in a price for later delivery
Forward Price = Futures Price + Basis
Ex: Futures Contract = $3.10
Basis = -20 cents
Forward Price = $ = $2.90

21. What are Put Options?
The Right to sell futures contracts at specific prices.
Strike Prices offered in 10 cent intervals for corn
Want to buy a Put Option for $3.10 corn
Basis = Premium = .12
Price Floor = Strike Price + Basis - Premium
Price Floor = $ = $2.78

22. What are Put Options? What if price goes up?
Futures = $3.50 Cash = $3.30
Net Price = Cash Price + Option Value - Premium
Net Price = $ = $3.18
What has the Put Option accomplished?

23. What are Put Options? What if the price goes down?
Futures = $2.50 Cash = $2.70
Net Price = Cash Price + Option Value - Premium
Net Price = $ = $2.78
What has the Put Option accomplished?