Understanding How Beef Cattle Prices Are Established
Beef Cattle Marketing
A Country Boy's
research into Beef Cattle Marketing leads to a better understanding of how Beef Cattle Prices are
established. Most of the information is directed towards commercial cattle producers but is equally important for
the Seedstock Producer. I believe we can all improve our Beef Cattle Marketing by doing a study of and the
understanding of human behavior.
Cattle prices are determined by how much beef
people choose to buy and sell in the market place. If people want to buy more beef than is available in the
marketing channel, then the price of beef is bid up rationing the beef among buyers. If producers need to
sell more beef than people are willing to buy, then the price of beef will be forced downward to move the
A lot of cattle producers seem to believe all you have to know or do in
the cattle industry to make a profit is to buy low and sell high but believe me the beef industry is more
than just the buying and selling cattle. Beef producers add value to their products at each stage in the
marketing channel. Cow-calf producers sell a product called a calf. What they are really selling is not
the calf but output from the cow and bull and the grass, grain, labor, management and capital used to produce
this product called a "calf". Stocker operators buy 300 to 500 pound calves from the cow- calf segment of the
industry and put an additional 300 to 400 pounds on them, thus increasing their value to the market
place. Feedlots buy the stocker cattle, feed grain to fatten and then sell them at about 1100 to 1300
pounds to the packer. The packer slaughters the animal and breaks the carcass into wholesale cuts for the
retailer who in turn sells the beef cuts to the final consumer. Each level within the marketing channel takes
the product from the preceding level, modifies it adding value to the product at each subsequent stage.
Marketing is then the cattleman’s way of obtaining dollars for the value he adds to the
product he produces. After combining the resources he has available to produce the calf, he receives value
for the animal by selling it. Failure to successfully market the animal is a waste of his time and the money
that he invested in the production phase. Marketing can improve the situation or it can ruin it.
Most producers are good production people, and they dislike the hassle
associated with marketing almost as much as keeping records. The fact remains that both record keeping
and marketing provide a viable means to increase producer profits. It is often the difficult things in
business that make the most money. In beef cattle production, survival depends on a producer being
above average in production, marketing, and financial management.
Beef Production And The Marketing System
The U.S. beef production and marketing system consists of production levels and marketing
components. Production levels include the cow-calf, stocker, feeder, slaughter-packer, retailer and consumer.
This is the physical route the calf takes from the producer to the final consumer. The marketing components
include the cash and the futures market. This is the economic route the calf takes from producer
through the marketing channel to the retail level for final sale.
Each production level buys or invests in additional production inputs
adding value to the animal. The animal is then sold to the next level in the production system or
ownership is retained, where more value is added. This process is repeated until products are finally sold to
the consumer at the retail level. It takes time to learn the beef production system and how the product moves
through the various levels. Production inputs include physical items like cows, bulls, stockers, feeders,
slaughter cattle, carcasses, etc.
It does take a little time to learn the marketing system and how to market beef.
Marketing inputs are made up of both information and knowledge. Marketing information to the producer
comes in the form of cash prices, futures prices, price outlook, and the supply/demand situation. A
producer must know what marketing alternatives are available to him, how to use each alternative, and how to
interpret market signals.
The cow-calf producer is the starting point for the beef production and
marketing process. The producer invests in land, animals, feed and other inputs to develop his
product--the calf. Typically, the cow- calf producer will wean the calf at a weight near 400 pounds or
higher. For the spring calving herd, this weaning period is sometime in the fall of the year.
Some cow-calf producers retain ownership of the calves from birth through
the stocker phase of the production process and even some maintain ownership through the feedlot. These
producers evaluate the profit potential at each production level before deciding to keep their cattle through
the next production phase. When their profit objective is reached they sell the cattle. Retained
ownership allows the producer the flexibility to reject the market price today in hope of obtaining a better
price at a later date. This market alternative can be successful if the cattleman can minimize the costs of growing
the animals during the extended ownership period. Also implied in this retained ownership decision is
the cattleman’s hope that the market does not turn against him.