ranching 101 marketing 2014

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    R n hin 1 1

    Marketing

    April15,2014

    CONFIDENTIAL

    Agenda

    Whatismarketing

    Whathappensatlivestockmarkets

    Preparingtomarketcattle

    Othertypesofmarketing

    Marketingresources

    CONFIDENTIAL

    Currentmarketing

    issues

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    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?

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    Premium/CommingledSales

    Advantages Disadvantages

    Allowssmalloperatorsto

    maximizetheprice

    potentialoftheircattle

    Verygoodpricediscovery

    Marketstandspaymentrisk,

    insureslegitimacyofbuyers

    Costtoparticipateinthe

    salemaybeprohibitive

    Infrequentsalesrequire

    advanceplanning

    Transportation,shipping,

    andsellingcostsarehigher

    CONFIDENTIAL

    becausefewmarketshold

    thesesales

    DirectTrade/Private

    Treaty

    Sales

    Advantages Disadvantages

    Termsmaybetailoredto

    specificsituations

    Easiertodevelopa

    reputationforgoodcattle

    Youhavetoworktofind

    buyers

    Youstandpaymentrisk

    CONFIDENTIAL

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    ForwardContracting

    Advantages Disadvantages

    Termsmaybetailoredto

    specificsituations

    Allowslongtermplanning

    toaspecificdeliverydate

    Allowsbasiscontractsand

    hedging

    Greaterknowledgerequired

    duetoinvolvementofrisk

    managementtools

    Upsidepricepotentialmay

    belimited

    Youstandpaymentrisk

    CONFIDENTIAL

    Satellite/OnlineVideo

    Sales

    Advantages Disadvantages

    Larger,targetedbuyersfrom

    largeareascanviewyour

    cattle

    Thevideosaleassumes

    paymentrisk

    Largelotsofcattlerequired,

    minimumofatruckload

    (6070calves)

    Requiresadvancedplanning

    CONFIDENTIAL

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    RetainingOwnership/

    FeedingPartnerships

    Advantages Disadvantages

    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

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    Registeredvs.CommercialSales

    Advantageofregisteredsalesforsellers:

    Monetizeyourgenetics

    Littleexplanationofyourproductisneeded

    Drawsaveryfocusedaudience

    Disadvantageofregisteredsalesforsellers:

    CONFIDENTIAL

    . .

    Resourceintensive

    Registeredvs.CommercialSales

    (contd)

    Advantageofcommercialsalesforsellers:

    Morebuyers

    Fewerresourcesrequired

    Disadvantageofcommercialsalesforsellers:

    Maynotdeliverexpectedreturns

    CONFIDENTIAL

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    at ea y appensata

    LivestockMarket?

    CONFIDENTIAL

    Bati EthiopiaCamel

    Market

    MondaySale

    CONFIDENTIAL

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    Whatreallyhappensata

    livestock

    market?

    CONFIDENTIAL

    UnloadYour

    Cattle

    CONFIDENTIAL

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    CattleCountedandIdentified,

    SellerInformationCollected

    CONFIDENTIAL

    BrandInformation

    Recorded

    CONFIDENTIAL

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    CattleSoldbyLotand/orPen

    CONFIDENTIAL

    CattleWeighed

    Post

    Sale

    CONFIDENTIAL

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    CattlePennedbyBuyer

    CONFIDENTIAL

    Buyers:Pay

    for

    and

    Load

    Cattle

    CONFIDENTIAL

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    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

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    MakingSenseoftheCheck:

    Example2Calves

    CONFIDENTIAL

    MakingSenseoftheCheck:

    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

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    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?

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    ExampleContracts

    BillofSale

    SuperiorLivestockAuction

    CONFIDENTIAL

    PreparingtoMarketCattle

    CONFIDENTIAL

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    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

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    CONFIDENTIAL

    WhoIs

    Your

    Competition?

    January:

    March:

    ,

    Somedoublerotationcalves

    SouthTXsalebarncalves

    February:

    , ,wheatyearlings

    Fewsalebarncattle

    April:

    Endofwheatcattle

    GA,AL,FLfreshcalves

    CONFIDENTIAL

    SouthTXwinterweedsandmarketcleanup

    May:Grazeoutcattlefrom

    wheatandTXoats

    MSryegrasscattle

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    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

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    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%

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    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

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    SeasonalImpacts

    CONFIDENTIAL

    SeasonalImpacts

    (contd)

    CONFIDENTIAL

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    SeasonalImpacts(contd)

    CONFIDENTIAL

    SeasonalImpacts

    (contd)

    CONFIDENTIAL

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    NumerousFreeMarketReports

    Seehandout

    CONFIDENTIAL

    ReadingaMarket

    Report

    CONFIDENTIAL

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    ReadingaMarketReport

    CONFIDENTIAL

    WhyWas

    This

    Load

    Worth

    More?

    CONFIDENTIAL

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    CurrentPrices

    CONFIDENTIAL

    CurrentPrices

    CONFIDENTIAL

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    CurrentPrices

    CONFIDENTIAL

    CurrentPrices

    CONFIDENTIAL

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    CurrentPrices

    CONFIDENTIAL

    CurrentPrices

    CONFIDENTIAL

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    Niche

    Markets

    CONFIDENTIAL

    NicheMarkets

    Producingaproductforaunique,specialtymarket:or anic natural rassfed etc.

    Why?:Additionalvalue

    Uniqueresources

    Whynot?:Wherearethebuyers?

    CONFIDENTIAL

    Extensiveinvestment

    may

    be

    hard

    to

    recoup

    Consideryourbusinessplanandresourcesbeforestartingtoproduceforanichemarket

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    OrganicBeef

    Advantage Disadvantages

    Somepremiumsavailable Beefmustbeverified

    throughUSDANational

    OrganicProgram(NOP)

    Significantstartupand

    ongoingverification

    Difficultprocesstomaster

    CONFIDENTIAL

    andsustain

    GrassFed

    Beef

    Advantage Disadvantages

    Somepremiumsavailable Beefmustbeverified

    throughUSDAAMS

    Somestartupandongoing

    verification,thoughmuch

    easierthanorganic

    Foragesupplymustbea

    CONFIDENTIAL

    priority

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    NonHormoneTreatedCattle(NHTC)

    Advantage Disadvantages

    Goodpremiumsavailable

    throughmainstream

    feedyards andpackers

    Beefmustbeverified

    throughUSDAAMS

    Somestartupandongoing

    verification,thougheasier

    thangrassfedandorganic

    Gooddocumentationis

    CONFIDENTIAL

    required

    ExportMarkets:

    Japan,

    Taiwan,

    Russia,

    etc.

    Advantage Disadvantages

    Premiumsupto$30

    40/head

    RequireUSDAprogram

    verification

    Requireadditionalrecord

    keeping

    Requiresomesupplychain

    controls

    CONFIDENTIAL

    Needto

    connect

    with

    downstreampremiums

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    AdvancedMarketing

    Hedgingwithfutureandoptions

    Forwardcontracting

    Basisagreements

    Gridmarketing

    CONFIDENTIAL

    CurrentMarketing

    Issues

    Foreigncurrencies

    Impactofdroughtonherdsize

    Infrastructureissues

    Newexportmarkets

    Increasingtruckweights

    CONFIDENTIAL

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    Questions?

    CONFIDENTIAL