Beef cattle in pasture

Livestock producers have a lot of marketing decisions for their animals. They also have some risk management tools available. 

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When it comes to marketing, livestock producers have a variety of choices to make. Andrew Griffith, ag economist with the University of Tennessee, says it can be helpful to start with some goals.

“When I talk to producers … I want them to have a plan: when you plan to sell cattle in the year, what weight you plan to sell them at,” he says.

However, Griffith says it is also important to be willing to change course as circumstances change.

“At the same time, you have to remain flexible and keep your plan a little bit fluid,” he says. “I have plans for my cattle, but if the market offers opportunities at other times, be ready to capture that value.”

For example, Griffith says if a producer plans to sell calves at 800 or 850 pounds, but the market offers a better chance with lighter weight calves earlier, the producer should be willing to sell. It’s good to have a plan and an overall idea, he says, but the primary goal is making a profit.

Gary Wright, farm management specialist for Iowa State University, says it is good to balance planning with flexibility.

“With any plan, it’s going to be forward looking, and you’re looking at some factors that might change,” he says. “You’ve got to be flexible. But the flip side is, you’ve got to be consistent. You’ve got to stay away from ego and greed.”

Brent Carpenter, ag business specialist for the University of Missouri, says a lot of producers’ marketing plan comes down to production schedule.

“For Missouri, most people are going to sell their calves shortly after weaning,” he says. “…The date those calves are born usually determines that (marketing time).”

Carpenter says producers might also be limited in their outlets to sell calves, with sale barns or maybe some farm-to-farm sales. He says marketing plans can be more detailed for grain, because it can be stored longer.

“That’s the big challenge for people with animals,” Carpenter says. “They don’t store very well. I think the marketing plan is tied to the production plan in that cycle.”

He says a lot of producers are shifting more to fall calving so they can sell lightweight calves in the spring, which is usually a good time to do that.

Producers also have decisions to make on risk management.

“There are some risk management tools that a person can choose,” Wright says.

Some of the tools available to help with risk management include futures, options and Livestock Risk Protection (LRP) insurance. Griffith says futures and options are more of a strategy for larger-scale producers.

“If you don’t have a 50,000-pound load, futures and options are not even feasible,” Griffith says.

The LRP insurance can be purchased on as few as one head, so it works for producers looking for some risk management on a smaller scale.

“The previous program, I could not encourage producers to use it,” he says. “But now the LRP insurance, they have several more offerings and they have a little higher subsidy, and it seems like it could be a more lucrative program for producers.”

Griffith says the old program rarely had offerings that were over 21 weeks out, but the new program has more offerings for a variety of time frames, giving producers a lot more possibilities.

“You can tell that it’s highly correlated to the options market for feeder cattle,” he says.

Carpenter says producers can try LRP on a small scale first.

“You can buy LRP with one head,” he says. “We suggest that you try it with a small number of cattle and see how it works. For very few dollars, you can get that experience.”

This article originally ran on agupdate.com.

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