Presentation Transcript

1. A Simple 12-Step Feeder Cattle Market Plan

   Walt Prevatt, PhD. Extension Economist & Professor Auburn University
2. A Simple 12-StepFeeder Cattle Market Plan A feeder cattle marketing plan can be simple. However, implementing any feeder cattle marketing plan “is not” EASY!
3. Step 1 – Estimated total pounds of feeder cattle production during 2011
4. Step 1 – Estimated total pounds of feeder cattle production during 2011
5. Step 8 – Review feeder cattle cash market alternatives and select your desired cash market outlet Private Treaty Auction Barn Telephone Auction Video Auction Internet Auction
6. Step 9 – Review feeder cattle market pricing alternatives and select the appropriate pricing alternative for your use Cash Short hedge Put option (In/Out/At-the-money) Synthetic put Fence a price Forward contract Livestock risk protection insurance
7. Step 10 – Describe your feeder cattle marketing plan Sell feeder cattle the 3rd week of August with a 10-day delivery window Sell approximately 137 head of feeder cattle (2+/- truckloads) Market feeder cattle at an average weight of 750-lbs. (shrunk wt.) Sell feeder cattle with a $4/cwt. price slide and 2% shrink FOB Expect feeder cattle market price to increase about 5% before the 3rd week in August Calculated feeder cattle breakeven price - $81.15/cwt. Calculated feeder cattle price objective - $105.44/cwt.
8. Step 10 – Describe your feeder cattle marketing plan …. continued Sell feeder cattle with the Grass Valley Feeder Cattle Marketing Association (Telephone auction) Use price protection on one load of feeders if the futures market price reaches my feeder cattle price objective Pre-weigh a percentage of feeder cattle 2 weeks before sale date (August 12th) to more closely estimate delivery weight Feeder cattle will be weighed at Country Squire Truck Stop Limit cut cattle to 4 head Market cut cattle as freezer beef
9. Step 11 – Execute your feeder cattle marketing plan Procure needed inputs for production practices Implement production practices to reach target level of production Monitor production levels (head and total pounds) and adjust market plan as needed Monitor production costs and adjust market plan as needed Sell feeder cattle the 3rd week of August with a 10-day delivery window Sell approximately 137 head of feeder cattle (2+/- truckloads Market feeder cattle at an average weight of 750-lbs. (shrunk wt.) Sell feeder cattle with a $4/cwt. price slide and 2% shrink FOB Expect feeder cattle market price to increase about 5% before the 3rd week in August Calculated feeder cattle breakeven price frequently with the latest data Calculated feeder cattle price objective frequently with the latest data
10. Step 11 – Execute your feeder cattle marketing plan … continued Monitor feeder cattle futures market prices Contact commodity broker, marketing agent, etc. for market info Contact commodity broker execute price protection if price objective is met Prepare market information for the Grass Valley Feeder Cattle Marketing Association Use price protection on one load of feeders if the futures market price reaches my feeder cattle price objective Pre-weigh a percentage of feeder cattle 2 weeks before sale date (August 12th) to more closely estimate delivery weight Prepare facilities ahead of time to load and weigh feeder cattle Limit cut cattle to 4 head Make arrangements with buyer or marketing agent to load feeder cattle Make arrangements to receive payment promptly for feeder cattle Make arrangements with customers for freezer beef
11. Step 12 – Evaluate your market plan after the shipment of the feeder cattle
12. Step 12 – Evaluate your market plan after the shipment of the feeder cattle
13. A Simple 12-StepFeeder Cattle Market Plan The spreadsheet for “Feeder Cattle Market Plan” may be downloaded from: http://www.ag.auburn.edu/agec/pubs/budgets/

14. A Simple 12-Step Feeder Cattle Market Plan

    Walt Prevatt, PhD. Extension Economist & Professor Auburn University