Factors to Consider When Marketing Cattle

Source: Saskatchewan Agriculture and Food

Well-defined marketing strategies are an essential component of any successful business, and cattle production is no different.

A marketing plan that outlines where, when, how, and to whom an enterprise will market its product is a requirement for any successful operation. Due to other demands, many beef producers keep this information in the back of their heads and seldom review it. Then, when the busy fall season approaches, the anxiety level increases as decisions need to be made that impact the financial status of the business for the coming year.

Beef economist Sandy Russell with Saskatchewan Agriculture and Food (SAF) says that, with significant movement from week to week in feeder cattle prices, it takes an in-depth understanding of the factors driving the current rate in order to determine the optimal strategy for any given cattle operation.

"Whatever market you are targeting, planning and analysis needs to be completed before finalizing any decision to sell," she stated.

Without a marketing plan, Russell believes that managers often end up making decisions based on industry averages or what has been done in the past, rather than what may be most profitable for their businesses at the time.

"No two beef operations are the same," she noted. "The advantages and disadvantages that any business has are often unique to that enterprise. Following the price trend alone will not necessarily be the most favourable decision for your business."

In order for producers to make appropriate marketing decisions, Russell says they should first conduct a financial analysis of their businesses. Specifically, farmers need to be aware of their cost to produce their product, as well as their yearly cash flow requirements. Once this is determined, a comparison of various marketing alternatives can be made and applied to the business.

"This is the only way to truly identify the most profitable marketing strategy for your calves," Russell said.

Managers must also consider the quality of their product and where that product best fits in the marketplace. Information on market trends, break-evens and projections needs to be collected and

continuously examined to keep on top of changes in the marketplace. This includes monitoring the local cash market as well as various futures markets to project the potential value of cattle and the impact that other factors, such as the Canadian dollar or the price of corn, may have on feeder markets.

According to Russell, cattle producers stand the best chance of maximizing their marketing opportunities by remembering a few key points.

First, utilize all market information resources available. "The more market intelligence you can utilize to help make your marketing decisions, the better," she noted.

Second, know your break-even price and have a marketing plan developed well in advance. This plan needs to be flexible as markets change, but it is important to have the initial strategy in place.

Third, remember that markets are built upon relationships. According to Russell, "it is important to build relationships with various participants in the marketplace, both to access information and to create opportunities to market cattle."

Fourth, be aware of various pricing methods and delivery alternatives. "Producers should understand what types of cattle do best under which pricing methods, and what alternatives work best for their businesses," she stated.

Fifth, have a comprehensive understanding of the entire industry, and identify what drives market price. "It is important to be aware of what is taking place around you in combination with what is influencing the marketplace," Russell said.

"Successful marketers do not isolate themselves from the industry or the marketplace. They are constantly watching and anticipating the market prices."

For more information, contact:
Sandy Russell, Beef Economist
Saskatchewan Agriculture and Food
Phone: (306) 933-5570
E-mail: srussell@agr.gov.sk.ca