Intro to Livestock Marketing Annie s Project Tim Petry Livestock Economist www.ndsu.edu/livestockeconomics 2018 ANNIES Feb2018
Always excuses NOT to market! Marketing takes time and planning Look for excuses TO market! Get $10/cwt. more for every calf, regardless of price level 5.50 cwt. X $10 = $55
Identify Your Market Most calves, cull cows and bulls, and sheep and lambs are sold at livestock auctions Most fed cattle and hogs sold directly to packers Specialty livestock such as goats, poultry, organic, grass fed, etc. require you to find and develop markets
Need to know your cost of production Cost-Return Projection -- Beef Cow-Calf Enterprise (Per Cow), 2018 1 N.D. Your Avg. Numbers VARIABLE COST PER COW: 1.Summer Pasture $ 140.00 $ 2.Hay--silage 170.00 3.Other feed 25.00 4.Protein and Mineral 25.00 5.Hired Labor, Custom Hire 25.00 6.Veterinary, Drugs, and Supplies 25.00 7.Utilities, Fuel, and Oil 30.00 8.Facilities and Equipment Repairs 40.00 9.Breeding Charge 10.00 10.Marketing 15.00 11.Miscellaneous 20.00 12.Interest 14.00 A.TOTAL VARIABLE COSTS $ 539.00 $ 0.00 FIXED COSTS PER COW 13.Depreciation $ 30.00 $ 14.Interest 10.00 15.Insurance 10.00 16.Cow interest, death loss 65.00 B. TOTAL FIXED COSTS $ 115.00 $ 0.00 C. TOTAL COSTS PER COW (A + B) $ 654.00 $ 0.00 Your Numbers RETURNS PER COW 2 % x Weight x Price 17.Steers:.45 x 590 x 1.60 x x $ 424.80 $ 0.00 18.Heifers:.26 x 570 x 1.35 x x 200.07 0.00 19.Cull cows;.14 x 1300 x 0.65 x x 118.30 0.00 20.Cull heifers:.05 x 900 x 1.15 x x 51.75 0.00 D. GROSS RETURNS PER COW $ 794.92 $ 0.00 E. RETURN OVER VARIABLE COSTS (D - A) $ 255.92 $ 0.00 F. RETURN OVER TOTAL COSTS (D - C) 3 $ 140.92 $ 0.00 1 Information in this budget is based on the North Dakota Farm and Ranch Business Management Annual Report, 2017. 2 Returns are based on a 90 percent weaning rate, 45 steers sold, 26 heifers sold, 19 heifers kept for replacement, 14 cull cows sold, and 5 cull heifers sold. Prices are projected for fall. 3 Return over total costs is return to unpaid family labor, management, and equity.
Average Net Return to Labor and Management Per Beef Cow N.D. Farm Business Mgmt., Excluding Red River Valley 1000 800 600 400 200 0-200 888990919293949596979899000102030405060708091011121314151617 Average Projected High 20% Low 20%
PRICE CYCLES Use for long run planning SEASONAL PRICE PATTERNS Most important marketing tool Reason for forward contracting, futures, options, LRP BOTH CAN BE AFFECTED BY CATASTROPHIC EVENTS 9/11/01 BSE Drought High feed cost Economic crisis
Cattle Price Cycle AVERAGE ANNUAL CATTLE PRICES 275 $ Per Cwt 250 225 200 175 150 125 100 75 50 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 500 600lb Steer Calves 700 800lb Feeder Steers Fed Steers Data Source: USDA AMS, Compiled and Forecasts by LMIC Livestock Marketing Information Center C-P-06 02/08/18
Seasonal Price Patterns Livestock Marketing Information Center: Data Source: USDA-AMS, Compiled & Analysis by LMIC
SF_LS796 Sioux Falls, SD Fri Feb 9, 2018 USDA-ND Dept of Ag Market News North Dakota Weekly Auction Summary - For the week ending Feb 10, 2018 Receipts: 10,726 Last Week: 11,842 Last Year: 9057 Feeder Steers Medium and Large 1 Head Wt Range Avg Wt Price Range Avg Price 46 407-438 431 210.00-218.50 214.28 73 461-496 483 196.00-208.00 203.93 141 500-548 538 181.00-200.00 190.63 64 512 512 209.25 209.25 Fancy 195 550-598 573 173.00-190.00 184.17 455 600-642 621 164.00-184.00 179.40 804 651-695 674 156.00-169.50 164.51 548 700-749 723 147.00-165.00 156.49 951 750-798 771 140.50-150.25 147.36 607 806-849 822 135.00-148.25 144.76 656 850-892 873 135.00-145.00 140.49 260 901-945 935 133.75-140.50 138.64 40 965-999 986 129.50-134.50 132.67 56 1042 1042 134.50 134.50
Wide range in prices for same weight and grade of calves at same market Important to move to top end Low: 5.5 cwt. x $181 = $995 Ave 190.63 = $1048 (+ $53) High 200 = $1100 (+ $105) Fancy 209.25 = $1151 (+ $156) Check with your market to see how to reach top of range
Premiums likely (but not consistent) for: Verified shots (ND VIP) Natural (no antibiotics or implants) Source/age verified Weaned Bovine Viral Diarrhea persistently infected (BVD PI) tested negative Beef Quality Assurance (BQA) Replacement quality heifers *Check with your market before selling
SF_LS796 Sioux Falls, SD Fri Feb 9, 2018 USDA-ND Dept of Ag Market News North Dakota Weekly Auction Summary - For the week ending Feb 10, 2018 Receipts: 10,726 Last Week: 11,842 Last Year: 9057 Feeder Heifers Medium and Large 1 Head Wt Range Avg Wt Price Range Avg Price 26 388 388 185.00 185.00 30 404-438 413 182.00-195.00 185.73 125 460-498 481 166.50-178.75 173.37 180 507-542 525 152.00-177.00 167.38 311 554-599 579 148.50-165.00 157.69 629 600-643 621 145.75-161.75 154.75 541 656-698 677 142.00-154.00 148.62 681 703-749 725 131.50-148.50 143.48 676 755-796 776 128.00-140.00 135.59 209 804-846 821 124.00-135.75 131.84 58 856-898 868 125.00-133.50 130.54 41 857 857 149.00 149.00 Replacement 45 904-920 910 126.50-127.50 127.39
Volatile Prices Will Continue $ Per Cwt. 240 220 200 180 160 140 120 SLAUGHTER LAMB PRICES Wooled, 110 130 lbs, Sioux Falls, Weekly 100 JAN APR JUL OCT Avg. 2012 16 2017 2018
Price Risk Management Tools Cash forward contract Video and internet auctions CME futures CME options Livestock Risk Protection (LRP) Which one or combination fits your marketing plan?
LRP Advantages Sold by livestock (crop) insurance agents 600 lb. & 600 lb. steers AND heifers, fed steers and heifers, hogs, lambs You pick market weight Any number (1 head minimum) Premium subsidized 13%, beginning farmer 23% Receive higher prices in up market Good way to learn for beginners www3.rma.usda.gov/apps/livestock_reports/main.aspx
Calf Marketing Plan 100 Cow Spring Calving Herd 46 575 lb. steer calves 26 550 lb. heifer calves Expected Market Date Nov. 15 Goal: Preprice 50 % of production Best Strategy: LRP Current Price: Steer $180/cwt. Heifer $160/cwt. Strategy # of Head Price Objective Time Deadline LRP 26 wk. LRP 13 wk. Market 12 steers 7 heifers 11 steers 6 heifers 46 steers 26 heifers $190 $170 $200 $185 May 15 Aug. 15 Nov. 15
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