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Lecture outline

Lecture outline. Characteristics of ag production that make agricultural marketing different from manufacturing. Nature of product and production Cycle and season Location Farmer marketing problem. Characteristics of ag products. Raw material Bulky, perishable products Quality variation

chloe-brock
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Lecture outline

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  1. Lecture outline • Characteristics of ag production that make agricultural marketing different from manufacturing. • Nature of product and production • Cycle and season • Location • Farmer marketing problem

  2. Characteristics of ag products • Raw material • Bulky, perishable products • Quality variation • Examples: • Fresh produce • Cattle • Grains

  3. Implications for markets • Location relative to consumers • weight reducing processes • perishable • Degree of handling • assembly, sorting, grading • Price elasticity • substitutes • perishable

  4. Characteristics of production • Upward trend in output • Increasing productivity • Annual variation in production • Supply and demand implications • Capacity utilization problem • Weather risk • Market risk

  5. Variability in Yield and Price Corn Soybeans Yield Price Yield Price Average 97.35 1.94 29.98 4.94 Std Dev 23.04 0.70 5.00 1.79 Stdev/Avg 24% 36% 17% 36%

  6. Characteristics of production • Cyclical variation in production • Psychological lag in production • Biological lag in production • Seasonal variation in production • Grain crops • Livestock marketings

  7. Time from decision to market • Beef cattle • 3.5 yrs Retain heifer to slaughter steer • Hogs • 1 yr Retain gilt to slaughter hog • Grains • Annual crops • Tree crops

  8. Annual variation in production S P Cobweb Model D Q

  9. Characteristics of production • Geographic concentration • Regional advantages • Varying cost of production • One selling price

  10. US Top 10 Beef Cow States Million Beef Cows, 2005 1.43 1.72 1.01 1.90 1.55 1.09 2.16 1.07 2.05 1.00 5.43 10 States 58% of Total

  11. US Top 10 Cattle Feeding States Million head on Feed, 2005 .290 .400 .920 2.47 1.10 .535 2.46 .355 .300 2.72 10 States 89% of Total

  12. US Top 10 Corn States, Million Bushels, 2004 1120 353 539 2244 491 1319 929 2088 432 466 10 States 84% of Total

  13. US Top 10 Soybean States, Million Bushels, 2004 236 40 497 207 220 499 287 223 111 124 10 States 81% of Total

  14. US Top 10 Hog States, Million Head, 2004 6.50 16.30 1.45 2.8 3.2 4.10 2.9 1.71 9.90 2.39 10 States 84% of Total

  15. US Top 10 Egg States, Million eggs, 2004 250 569 1044 647 272 531 470 289 436 420 10 States 64% of Total

  16. US Top 10 Milk States, Million pounds, 2004 451 675 1837 969 757 526 838 3038 560 500 10 States 71% of Total

  17. Iowa • #1 producer of • Corn, Soybeans, Ethanol, Hogs, Eggs • Significant producer of • Feedlot cattle #5 • Beef Cows #11 • Milk #12

  18. Characteristics of production • Scale of production • Economies of scale • Narrow margins • Market assembly problems • Differing quality

  19. Input sector • Farmers are buyers and sellers • Increasing reliance on purchased inputs • Cost-price squeeze • Move to direct purchases of large volume

  20. Farmer marketing problems • Disaggregate decision making • Weather and disease risk • Inability to adjust supplies • Price takers/hard to organize • Free rider problem

  21. Farmer marketing problems • Cost-price squeeze • Implications for scale • Self induced as output prices increase • Buyer market power • Changing food market efficiency • Price differentials for quality • Livestock grid marketing • Wheat protein • Component pricing of milk

  22. So what? • Increasing economies of scale • Production and cost risk • Competition for inputs • Single selling price

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