ranching 101 marketing 2014

8/10/2019 Ranching 101 Marketing 2014

1/34

R n hin 1 1

Marketing

April15,2014

CONFIDENTIAL

Agenda

Whatismarketing

Whathappensatlivestockmarkets

Preparingtomarketcattle

Othertypesofmarketing

Marketingresources

CONFIDENTIAL

Currentmarketing

issues


2/34

WhatisMarketing??

PriceDetermination:thebroadforcesofsupplyand

commodity.

Price

Discovery:istheprocessbywhichbuyersand

sellersarriveataspecificpriceforagivenlotof

productatagivenlocationforaspecific timeperiod.

CONFIDENTIAL

KeyMarketing

Decisions/Factors

Whatarethegoalsforyouroperation?

Marketingoroperationalplan

Whatresourcesdoyouhaveavailable?

Whatareyoubuying/selling?

Smallvs.largevolume

CONFIDENTIAL

Whoisbuying?

When,where,what?


3/34


4/34

Premium/CommingledSales

Advantages Disadvantages

Allowssmalloperatorsto

maximizetheprice

potentialoftheircattle

Verygoodpricediscovery

Marketstandspaymentrisk,

insureslegitimacyofbuyers

Costtoparticipateinthe

salemaybeprohibitive

Infrequentsalesrequire

advanceplanning

Transportation,shipping,

andsellingcostsarehigher

CONFIDENTIAL

becausefewmarketshold

thesesales

DirectTrade/Private

Treaty

Sales


Termsmaybetailoredto

specificsituations

Easiertodevelopa

reputationforgoodcattle

Youhavetoworktofind

buyers

Youstandpaymentrisk

CONFIDENTIAL


5/34

ForwardContracting


Termsmaybetailoredto

specificsituations

Allowslongtermplanning

toaspecificdeliverydate

Allowsbasiscontractsand

hedging

Greaterknowledgerequired

duetoinvolvementofrisk

managementtools

Upsidepricepotentialmay

belimited

Youstandpaymentrisk

CONFIDENTIAL

Satellite/OnlineVideo

Sales


Larger,targetedbuyersfrom

largeareascanviewyour

cattle

Thevideosaleassumes

paymentrisk

Largelotsofcattlerequired,

minimumofatruckload

(6070calves)

Requiresadvancedplanning

CONFIDENTIAL


6/34

RetainingOwnership/

FeedingPartnerships


Opportunitytotake

advantageofcattlethat

performwell

Someyearsthismakesalot

ofmoney

Generally,largelotsof

cattlerequired,minimumof

atruckload(6070calves)

Requiresadvancedplanning

Generallyrequires

additionalequity

CONFIDENTIAL

Someyearsthislosesalot

of

money,

greater

risk

BeforeCommitting

to

aSale

Type

Knowwhatyouhaveinthe

ca e

Knowwhatitwillcosttohold

cattlelonger

Understandwhatresourcesyou

CONFIDENTIAL

Fullyunderstandtherisksat

hand:whatcanyougain/lose


7/34

Registeredvs.CommercialSales

Advantageofregisteredsalesforsellers:

Monetizeyourgenetics

Littleexplanationofyourproductisneeded

Drawsaveryfocusedaudience

Disadvantageofregisteredsalesforsellers:

CONFIDENTIAL

. .

Resourceintensive

Registeredvs.CommercialSales

(contd)

Advantageofcommercialsalesforsellers:

Morebuyers

Fewerresourcesrequired

Disadvantageofcommercialsalesforsellers:

Maynotdeliverexpectedreturns

CONFIDENTIAL


8/34

at ea y appensata

LivestockMarket?

CONFIDENTIAL

Bati EthiopiaCamel

Market

MondaySale

CONFIDENTIAL


9/34

Whatreallyhappensata

livestock

market?

CONFIDENTIAL

UnloadYour

Cattle

CONFIDENTIAL


10/34

CattleCountedandIdentified,

SellerInformationCollected

CONFIDENTIAL

BrandInformation

Recorded

CONFIDENTIAL


11/34


12/34

CattleSoldbyLotand/orPen

CONFIDENTIAL

CattleWeighed

Post

Sale

CONFIDENTIAL


13/34

CattlePennedbyBuyer

CONFIDENTIAL

Buyers:Pay

for

and

Load

Cattle

CONFIDENTIAL


14/34

Seller:PickupYourCheck

CONFIDENTIAL

MakingSenseoftheCheck:

Example1Cows

Commission: 3%ofgross

BrandInspection: $0.60/head

Insurance: 0.3%/head

Feed: $2.75/head

Beefcheckoff: $1.00/head

Totaldeductions: 3.7%ofgross

CONFIDENTIAL


15/34


Example2Calves

CONFIDENTIAL


Example2

Commission: 3%ofgross

BrandInspection: $0.60/head

Insurance: 0.3%/head

Feed: $1.75/head

Beefcheckoff: $1.00/head

Totaldeductions: 3.7%ofgross

CONFIDENTIAL


16/34

MoreInformation

Southernmarketsgenerallyrelyonpricecommissions:34%ofsale rice

Northernmarketsgenerallyrelyonperheadcommissions:$2535/head

Mostmarketswillnotpublishtheircommissionmodels

Mostmarketswillchargesomeformofyardage

CONFIDENTIAL

or ee wa er

Beefcheckoff andmarketinspectiondeductionsare

standard

Questions

Whopaysiftheanimalishurtorkilled?

Whendoestitletransfer?

DoIhavetoselltheanimalifIdonotlikethe

price?

Whenispaymentforpurchasesdue?

CONFIDENTIAL

Whenis

the

market

required

to

pay

me?

Whatifthecheckbounces?


17/34

ExampleContracts

BillofSale

SuperiorLivestockAuction

CONFIDENTIAL

PreparingtoMarketCattle

CONFIDENTIAL


18/34

HowDoYouMakeMore?

GiveBuyersConvenient WaytoReduceRiskandOpportunitytoMakeMoney

Convenience: Largerlotsoflikeanimals

Providewhatthebuyerwants:mayormaynotbequality

ReducedRisk:Healthyanimals

VAC45,VAC34,etc.

CONFIDENTIAL

OpportunitytoMakeMoney:

More

information

on

cattleLighterweightsvs.heavierweights

What

Information

Do

Buyers

Want?

CONFIDENTIAL


19/34

CONFIDENTIAL

WhoIs

Your

Competition?

January:

March:

,

Somedoublerotationcalves

SouthTXsalebarncalves

February:

, ,wheatyearlings

Fewsalebarncattle

April:

Endofwheatcattle

GA,AL,FLfreshcalves

CONFIDENTIAL

SouthTXwinterweedsandmarketcleanup

May:Grazeoutcattlefrom

wheatandTXoats

MSryegrasscattle


20/34

WhoIsYourCompetition?(contd)

June: September:

a e arnca vesan

grazeoutcattle

July:

OKOsageandcentralTX

yearlings

Li htFLcalves

grassan n

Hillsyearlings

COweanedcalves

October:

NMandCOhighcountry

calves

CONFIDENTIAL

August:

FLcalves

FewsouthTXcalves

Cleanupgrassyearlings

TXweaned

calves

WhoIs

Your

Competition?

(contd)

November: KeyQuestions:

eanupa c asses

Salebarnlightweights

December:

Mexicanborder,ifopen

Cleanuptradeforfirst

en s ra evo ume

highestandlowest?

Whenarefeedyards

mostfull?

Whichcattleperform

thebest?

CONFIDENTIAL


21/34

IfNotUsingaLivestockMarket,

UnderstandYourShrink

WhatisShrink?:lossin Example:

transportationstress,feed/waterdeprivation,andmanureloss

Percentagedeductionindeliveredanimalweight

weight

3%shrink=18pounds

Payweight=600 18,582pounds

CONFIDENTIAL

Standardshrink:3%pencil

shrink

IfNotUsingaLivestockMarket,

UnderstandYourShrink(contd)

Standardshrink(8hourdrylot):3%pencilshrink

, ,truck:2%shrink

Hauled2550miles,weighedontruck:1%shrink

Hauled25miles,unloadedandweighedontruck:0%shrink

GatheredinAM,trailed1mileorless:3%shrink

CONFIDENTIAL

Gatheredin

AM,

trailed

14miles:

2%

shrink

Ifcattlegivenhay/waterovernightorpostgathering,increaseshrinkby1%


22/34

What

Are

They

Worth?

CONFIDENTIAL

Calfand

Feeder

Prices

PrimaryInfluences:

upp yo eca e

Demand:primarilyfeedyard profitability

Availabilityof/Costtogrowanimals:

Pasture,hay,etc.

Corn:ruleofthumbisthata$0.10/bu changeincorn=$1.00/cwtchangeinfeedercattle

CONFIDENTIAL

Otherfactors

such

as

consumer

demand

at

retail

havesomeeffectbutitismutedduetothematureofthesupplychain


23/34

SeasonalImpacts

CONFIDENTIAL

SeasonalImpacts

(contd)

CONFIDENTIAL


24/34

SeasonalImpacts(contd)

CONFIDENTIAL

SeasonalImpacts

(contd)

CONFIDENTIAL


25/34

NumerousFreeMarketReports

Seehandout

CONFIDENTIAL

ReadingaMarket

Report

CONFIDENTIAL


26/34

ReadingaMarketReport

CONFIDENTIAL

WhyWas

This

Load

Worth

More?

CONFIDENTIAL


27/34

CurrentPrices

CONFIDENTIAL

CurrentPrices

CONFIDENTIAL


28/34

CurrentPrices

CONFIDENTIAL

CurrentPrices

CONFIDENTIAL


29/34

CurrentPrices

CONFIDENTIAL

CurrentPrices

CONFIDENTIAL


30/34

Niche

Markets

CONFIDENTIAL

NicheMarkets

Producingaproductforaunique,specialtymarket:or anic natural rassfed etc.

Why?:Additionalvalue

Uniqueresources

Whynot?:Wherearethebuyers?

CONFIDENTIAL

Extensiveinvestment

may

be

hard

to

recoup

Consideryourbusinessplanandresourcesbeforestartingtoproduceforanichemarket


31/34

OrganicBeef

Advantage Disadvantages

Somepremiumsavailable Beefmustbeverified

throughUSDANational

OrganicProgram(NOP)

Significantstartupand

ongoingverification

Difficultprocesstomaster

CONFIDENTIAL

andsustain

GrassFed

Beef


Somepremiumsavailable Beefmustbeverified

throughUSDAAMS

Somestartupandongoing

verification,thoughmuch

easierthanorganic

Foragesupplymustbea

CONFIDENTIAL

priority


32/34

NonHormoneTreatedCattle(NHTC)


Goodpremiumsavailable

throughmainstream

feedyards andpackers

Beefmustbeverified

throughUSDAAMS

Somestartupandongoing

verification,thougheasier

thangrassfedandorganic

Gooddocumentationis

CONFIDENTIAL

required

ExportMarkets:

Japan,

Taiwan,

Russia,

etc.


Premiumsupto$30

40/head

RequireUSDAprogram

verification

Requireadditionalrecord

keeping

Requiresomesupplychain

controls

CONFIDENTIAL

Needto

connect

with

downstreampremiums


33/34

AdvancedMarketing

Hedgingwithfutureandoptions

Forwardcontracting

Basisagreements

Gridmarketing

CONFIDENTIAL

CurrentMarketing

Issues

Foreigncurrencies

Impactofdroughtonherdsize

Infrastructureissues

Newexportmarkets

Increasingtruckweights

CONFIDENTIAL


34/34

Questions?

CONFIDENTIAL

ranching 101 marketing 2014

Documents