Marketing Beef Cattle
Chapter 19
Objectives
• Describe the supply and demand cycles
for beef, and explain how they affect the
market price
• Identify and describe the market classes
and grades of beef cattle
• Describe various methods of marketing
beef cattle
Objectives (cont.)
• Describe how beef cattle should be
handled to prevent losses when marketing
• Explain the use of future markets with beef
cattle
Beef Checkoff and Promotion
• Beef Promotion and Research Act of 1985
– Established $1 per head checkoff for every
head of beef sold in United States
– Collected by auctions, packers, other markets
– Used to promote beef as a food
• Some beef produces have challenged
legality of program
Supply and Demand
• Supply
– Amount of a product producers will offer for
sale at a given price at a given time
• As prices rise, willingness to sell goes up
• Demand
– Amount of a product that buyers will purchase
at a given price
• As prices rise, demand decreases, and vice versa
Supply and Demand (cont.)
• Combined effect of supply and demand
governs prices of beef
• Seasonal prices tend to vary for cattle
– Due to seasonal patterns, cattle finishing is
concentrated in large commercial feedlots
– Short- and long-term trends determine the
prices for cattle
Methods of Marketing
• Terminal Markets
– Also called central markets or public
stockyards
– Owned by a stockyard company
– Stockyard charges for use of the facility
– Do not own cattle
Methods of Marketing (cont.)
• Terminal Markets (cont.)
– Have two or more commission firms
– Consigning is the function of the
commission firm
– The commission firm charges a fee called a
commission
Methods of Marketing (cont.)
• Terminal Markets (cont.)
– Costs at a terminal market include
•
•
•
•
Yardage
Feed
Insurance
Selling fees
– Markets exist for both feeder and slaughter
cattle
Methods of Marketing (cont.)
• Auction Markets
– Cattle are sold by public bidding
– Auction markets are also called local sale
barns and community auctions
– Costs include charges for yardage, feed,
insurance, brand, and health inspection
– Feeder and slaughter cattle both sold
Methods of Marketing (cont.)
• Direct Selling and Country Markets
– No commission firms or brokers involved
– Contract sales used
– Number of cattle sold by direct marketing is
increasing
– Increasing numbers of cattle are being bought
on a grade and yield basis
Methods of Marketing (cont.)
• Electronic Marketing
– Marketing using computer technology
– Similar to auction selling
– Bidders can buy from home and do not have
to travel to auction barn
– Video auctions are growing in popularity,
including online video auctions
Methods of Marketing (cont.)
• Packers and Stockyards Act
– Federal law administered by USDA
– Regulates cattle moving across state lines
– Sets rules for fair business practices and
competition
– Violators may be warned or may be
suspended
• If suspended, not allow to continue business
Methods of Marketing (cont.)
• Purebred Marketing
– Purebred cattle is a specialized business
– Usually sold by private sales or by auction
• Selecting a Market
– Select based on price, costs, and convenience
• Shrinkage
– Loss of weight as cattle are moved to market
Methods of Marketing (cont.)
• Price Information
– Producer must be aware of current prices
• Labeling of Meat
– Must show country of origin
• Use of Ultrasound to Determine Live
Animal Quality
– Research gauging value as assessment tool
Methods of Marketing (cont.)
• Effect of Mergers on Marketing
– Ongoing debate to determine if too few
companies have too much control
– USDA estimates 80 percent of beef in United
States controlled by four largest companies
– USDA analysis reported no impact on beef
prices, though small farm organizations
disagree
Market Classes and Grades
of Beef
• Calves
– Beef animals younger than 1 year old
• Slaughter Cattle
– Class of cattle based on sex definitions and
grade based on carcass merit
• Carcass Beef
– Age and sex determines class of beef carcass
Handling Cattle Prior to
and During Marketing
• Proper handling before shipping and
during transport can save producer money
• Cattle can be conditioned prior to shipping
to reduce shrinkage
• Feed depends on how cattle will be sold
• Cattle should be moved slowly, quietly
Cattle Futures Market
• Contracts representing commodity are
bought, sold rather than actual commodity
• Cattle feeder may use futures market to
hedge on the price of cattle, providing
some protection against price changes
• May reduce opportunity for added profit if
prices go up