Livestock Marketing - Why do you need a marketing plan?

Jay Parsons Author

11/20/2020 Added

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Livestock Marketing

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[00:00:02.490]Welcome.
[00:00:03.323]My name is Jay Parsons.
[00:00:04.520]I'm a professor and farm and ranch management specialist
[00:00:07.860]with the Department of Agricultural Economics
[00:00:10.090]at the University of Nebraska-Lincoln.
[00:00:13.060]And today, I'd like to talk to you about livestock marketing
[00:00:16.010]specifically why do you need a marketing plan?
[00:00:21.000]I'd like to start with a simple question.
[00:00:22.810]What do you suppose producers are most concerned
[00:00:25.670]about when marketing cattle?
[00:00:29.910]When I ask this question out in the public,
[00:00:32.170]I give them these three choices.
[00:00:33.480]I say, are you concerned about getting the highest price,
[00:00:36.280]covering costs in order to make a profit
[00:00:38.720]or just looking really smart with your marketing decisions?
[00:00:42.640]This is a typical answer or a spread it,
[00:00:45.200]percentage of answers that I get from an audience.
[00:00:48.520]A few admit that they're just chasing the highest price
[00:00:52.410]but they won't go so far as to admit
[00:00:54.090]that they're just trying to look smart
[00:00:55.300]because they made a great marketing decision
[00:00:57.690]and ended up with the highest price.
[00:00:59.750]Most people say that they're interested
[00:01:02.200]in covering costs and making a profit.
[00:01:08.350]Now, why has that become so difficult?
[00:01:09.910]Well, if you look at our annual,
[00:01:11.420]average annual cattle prices over the last 20 or 30 years,
[00:01:15.750]this is the pattern that has evolved.
[00:01:17.700]We saw a fairly steady cattle prices throughout the 90s,
[00:01:22.210]slight uptrend tick through the first decade
[00:01:25.590]of this century and then when we saw
[00:01:27.130]that extreme push upward in cattle prices
[00:01:31.670]as a result of the 2012 drought.
[00:01:34.960]Since then we saw a very steep fall off
[00:01:38.540]and then a continuing very steady price trend
[00:01:42.210]over the last three to four years where we've ran
[00:01:45.230]right in that 125, 120 range for the fed steers
[00:01:51.410]up to the 170s for the lighter weight weaned calves
[00:01:55.790]on an annual basis.
[00:01:57.690]And these prices be per 100 weight, of course.
[00:02:02.120]So when we saw that uptick in prices,
[00:02:03.970]we also saw an uptick in calf returns.
[00:02:06.820]So 2014, 2015, were some of the most profitable years
[00:02:10.600]on record, it was easy to make a return there.
[00:02:12.660]You didn't have to be a rocket science in the marketplace
[00:02:15.300]'cause prices were so high.
[00:02:16.650]Everybody was locking in profits
[00:02:19.520]with their marketing decisions.
[00:02:21.210]But of course, that's not normally the case.
[00:02:22.990]Normally it's very variable
[00:02:24.270]in terms of the cow-calf returns.
[00:02:27.320]And we see, you know, some years you make money,
[00:02:29.898]some years you lose money.
[00:02:32.560]In the last few years,
[00:02:34.800]it's been more losses than gains unfortunately.
[00:02:38.260]And most of that's because when you have high prices,
[00:02:41.210]people tend to bid up those input costs
[00:02:43.820]and they end up, you know,
[00:02:46.170]without making as near as much money.
[00:02:49.200]This is also in reaction to the cow inventory
[00:02:52.900]that we had over time.
[00:02:54.060]We had, cow inventory was highest back in 1996.
[00:02:58.460]Fairly steady decline on a national basis
[00:03:02.497]and then when we hit that 2012 drought,
[00:03:05.050]it kinda bought them out.
[00:03:06.710]Prices spiked, people started rebuilding the herd,
[00:03:10.160]and you could argue
[00:03:11.240]that they're still rebuilding their herd.
[00:03:13.310]And as a result of that increase in cattle inventory,
[00:03:16.898]and cattle inventory in general,
[00:03:18.900]we've seen a drop off in prices
[00:03:20.920]and a drop-off in cow-calf returns.
[00:03:24.560]This is the beef cow inventory in Nebraska.
[00:03:28.280]It mirrors much of what we saw on a national basis
[00:03:30.900]although that drop from the 90s
[00:03:33.590]was a little bit more delayed,
[00:03:35.660]beef cow inventory in Nebraska continued to increase
[00:03:38.170]to the end of the 90s
[00:03:39.890]and the drop-off since then
[00:03:41.270]and inventory has been a little less steady
[00:03:42.902]than it was depicted on the previous slide
[00:03:46.010]on a national basis.
[00:03:47.680]We've seen a little more volatility
[00:03:49.180]but certainly since that low inventory of 2014,
[00:03:52.770]we've seen a rebuilding the herd here in Nebraska
[00:03:55.990]much like what we've seen on a national basis.
[00:04:00.120]Okay, so why am I telling you all this?
[00:04:01.710]Well, high prices bring higher inventories
[00:04:05.120]but high prices also bring higher costs.
[00:04:08.800]We have fairly steady cow costs throughout the 90s,
[00:04:12.700]creeped up in 2000 through 2010,
[00:04:17.050]that first decade of this century.
[00:04:21.120]And that is, as we saw the prices steadily work your way up,
[00:04:25.140]we also see people bidding more for pasture rent
[00:04:29.130]and other input costs that we had the big run-up in 2014
[00:04:34.891]and as those prices went up and they've stayed up
[00:04:37.360]even though the market prices for cattle
[00:04:40.740]have dropped back down to more normal price ranges,
[00:04:44.770]the cow-calf costs have stayed quite high.
[00:04:49.910]We recently did some cow-calf budgets
[00:04:51.990]with focus groups here in Nebraska.
[00:04:54.160]And this was five of the budgets
[00:04:56.670]that we've gone through two iterations on.
[00:04:59.800]One of them in the Southeast
[00:05:01.520]which is basically here within driving distance of Lincoln.
[00:05:06.720]We did two of them up in the Northeast for people that drove
[00:05:08.950]into Norfolk to work with us on those budgets.
[00:05:11.470]And then we did two of them out in the panhandle,
[00:05:13.430]had a research center in Scottsbluff
[00:05:15.810]for people that came in there to work on those budgets.
[00:05:19.510]Different sizes of cow herds,
[00:05:20.960]anywhere from 50 a head up to 400 a head
[00:05:23.573]for what we call the Northern Panhandle budget.
[00:05:27.540]Revenue, fairly steady across the board there,
[00:05:32.300]the Northeast budget as you see kind of an outlier
[00:05:35.480]that 200 head herd with $984 of revenue per cow basically.
[00:05:41.940]The reason that's so high
[00:05:42.820]is they actually bought in replacements
[00:05:45.130]so they were able to sell all of their heifer calves.
[00:05:47.710]They weren't retaining them in the herd
[00:05:49.780]and building their own heifer replacement herd
[00:05:52.200]whereas the other herds were.
[00:05:54.300]But if you take that out of the situation,
[00:05:56.400]they're all pretty steady right in that $800 range,
[00:05:59.090]eight to $900 range in terms of revenue per head,
[00:06:02.220]their costs varied anywhere from that to $1,100
[00:06:06.200]for that Northeast 200 head herd,
[00:06:09.520]because again they're having to buy in
[00:06:11.110]those replacement heifers
[00:06:12.130]so that was kind of an outlay,
[00:06:13.930]outlier all the way down to $805 per head
[00:06:17.900]on the cash cost side for the panhandle group.
[00:06:21.390]So if you see the net cash income was only positive
[00:06:23.900]for that panhandle group that had the lower costs
[00:06:26.700]when you threw in the non-cash costs and total all that up
[00:06:29.380]everybody lost money on a per account basis.
[00:06:32.990]So that's typical of what we see these days.
[00:06:36.230]Cow costs running in at 1000 to $1,200 per head per cow
[00:06:41.900]basis for a cow herd whereas revenues blended more
[00:06:44.620]in than that eight or $900 range.
[00:06:47.317]And so people are not making money, but again,
[00:06:49.950]this is on full, full cost,
[00:06:52.450]so they're paying pasture rent on this
[00:06:54.020]and we'll talk about that here in a second
[00:06:55.960]in terms of how difficult that makes it to earn money.
[00:06:59.740]If you put this on a per a 100 weight basis
[00:07:01.923]in terms of cost of pounds sold,
[00:07:05.960]I like to take that call revenue out as a cost.
[00:07:10.700]So dollar for dollar offsetting costs
[00:07:14.020]to see what we have for residual costs
[00:07:16.060]that we can contribute to the calves being sold,
[00:07:18.920]and then divide that
[00:07:20.460]by the pounds of cash being sold per cow
[00:07:24.460]which gives you that,
[00:07:25.880]takes into account calf death loss,
[00:07:27.650]open cows and stuff like that.
[00:07:29.850]When you do that on these budgets
[00:07:31.680]you see a pretty steady story here of anywhere
[00:07:34.780]from $2 and 13 cents a 100 weight up
[00:07:37.530]to that $2 and 40 cents a 100 weight,
[00:07:40.080]in terms of cost of production
[00:07:42.570]for the cows that they actually sell.
[00:07:45.040]Very seldom do we see prices go that high.
[00:07:47.440]We saw it in 2014 with the reaction to the drought
[00:07:52.280]but this is not common to be able to cover this kind
[00:07:54.680]of cost to production.
[00:07:56.210]So if people aren't making money
[00:07:57.700]how are they staying in business?
[00:07:59.160]Well, there's a lot of the assumptions
[00:08:01.440]that go into building those budgets
[00:08:03.090]and one of them is the non-cash costs.
[00:08:06.100]And sometimes those non-cash costs have a big effect
[00:08:10.020]on things in terms of depreciation and stuff like that
[00:08:13.810]that maybe they're not recapturing all of that.
[00:08:17.040]If you did those same budgets on a cash cost basis
[00:08:19.960]taking that on cash costs out of it
[00:08:22.210]you end up with a cost anywhere from a dollar 60
[00:08:26.400]per a 100 weight or per pound, sorry, up to a 205.
[00:08:31.660]So now we're starting to get into the range
[00:08:33.610]at least with that smaller cowherd of the pen
[00:08:36.450]you know, or we might be able to capture that kind
[00:08:38.570]of price in the marketplace and cover these costs.
[00:08:43.980]We did assume in these budgets that people were paying rent
[00:08:47.210]for all of their pasture.
[00:08:48.950]If you further adjust this down
[00:08:50.820]by one third on the land cost
[00:08:53.110]under the assumption that half those pastures are owned,
[00:08:56.450]so they don't have to pay rent on half the pastures
[00:08:58.580]but they do have to pay the land taxes on those.
[00:09:00.760]And if you figure in a typical land tax rate
[00:09:03.550]it works out that that's gonna capture basically a third
[00:09:08.500]of those land costs would be non-cash
[00:09:10.560]that'd be what you would expect to have return
[00:09:13.330]on investment type of stuff figured in there.
[00:09:16.950]If you take that into account
[00:09:18.260]then you get into these price ranges
[00:09:19.940]that you might actually see in the marketplace.
[00:09:22.110]So we had that outlier in the panhandle of a dollar 44
[00:09:27.610]propound but most of these are right in that mid 170 range
[00:09:31.540]what's just typically a price that you might see
[00:09:34.760]for weaned calves out there in the marketplace.
[00:09:37.550]Why am I telling you all this?
[00:09:38.890]Because it's a struggle to make money
[00:09:41.630]in the cattle business.
[00:09:43.230]One of the keys to making money though
[00:09:44.970]with a marketing plan is to know what kind
[00:09:46.790]of costs you're trying to cover.
[00:09:48.370]So everybody should be doing some kind
[00:09:50.820]of exercise like this to get a handle
[00:09:52.870]on what it is they need in the marketplace to make money,
[00:09:56.180]and then they should build their marketing plan
[00:09:58.499]around the idea that they're trying to cover these costs.
[00:10:02.410]And that's what we see people typically say
[00:10:04.377]and that they're trying to accomplish with the market plan,
[00:10:07.360]but the first thing that they have to do is get a handle
[00:10:09.610]on what it's actually costing them to produce
[00:10:12.290]so they can do that with their marketing plan.
[00:10:16.990]So which of the following best describes
[00:10:19.110]your cost to production?
[00:10:20.610]Have you calculated?
[00:10:22.600]Do you think you could calculate it with
[00:10:25.060]or at least come close with a very educated guess
[00:10:27.242]or it's just a total wild guess at it, or you have no clue.
[00:10:31.330]Okay.
[00:10:32.163]Typical responses I get when I go out
[00:10:33.550]and do extensions programs
[00:10:34.840]is they split one-third one-third one-third
[00:10:37.970]across the fact they claim to have their cost
[00:10:40.940]of production calculated,
[00:10:42.160]meaning they keep good records
[00:10:43.560]and every year they kind of take a really good look
[00:10:46.360]at what it actually costs them produce those calves
[00:10:49.790]or they are at least able to make an educated guess
[00:10:52.370]at it is another third
[00:10:53.800]hardly anybody admits to that saying they could just,
[00:10:56.560]it's a wild guess, but probably not very close.
[00:10:58.910]'Cause most of them are just go the route
[00:11:01.000]and say we really don't know.
[00:11:02.530]We've never really looked at it and we don't have a clue.
[00:11:06.310]So this part is a little bit scary
[00:11:08.270]in a sense that a third of the population is flying blind
[00:11:11.550]and another third is probably not cut very clear vision
[00:11:16.140]of what it is they're trying to accomplish
[00:11:18.500]in the marketplace.
[00:11:21.600]So what is a marketing plan?
[00:11:22.920]Once you have that cost of production
[00:11:24.480]what do you do with it?
[00:11:25.390]How do you build a marketing plan around it?
[00:11:27.980]Well, marketing plan is really geared
[00:11:31.510]to answer these five questions, okay?
[00:11:34.530]You wanna know what it is
[00:11:35.640]that you are going to produce yourself.
[00:11:37.520]So it makes you think
[00:11:38.600]about what it is you're actually gonna have to sell
[00:11:41.920]that you're wanting to build this marketing plan for.
[00:11:46.380]Where is it that you plan to sell it?
[00:11:48.720]What are your options?
[00:11:49.890]That places that you could sell it.
[00:11:52.160]Okay. Practically.
[00:11:53.810]And then when could you sell it there?
[00:11:56.460]Okay.
[00:11:57.293]So that's a combination of when you would have it ready
[00:11:59.208]and when you can have it delivered and so on.
[00:12:02.520]Okay.
[00:12:03.353]So those are kind of the nuts and bolts
[00:12:04.186]no matter what you're selling
[00:12:05.320]but you also wanna add to that objectives and goals
[00:12:09.290]given the current market conditions
[00:12:11.150]in your financial situation
[00:12:12.570]and this is where your cost of production comes into play.
[00:12:15.800]Okay.
[00:12:16.633]You need to know what your cost of production is,
[00:12:18.250]you need to know what the current market conditions are
[00:12:21.660]and how easily it will be to cover that cost of production.
[00:12:25.580]And then on top of that
[00:12:26.420]you need to know your financial situation
[00:12:28.180]so you know how much risk to take
[00:12:30.740]in not covering that cost of production.
[00:12:32.646]And if you have a pretty good financial cushion
[00:12:34.760]you could take a little bit more risk
[00:12:36.407]and not getting all of your costs covered in a given year.
[00:12:40.160]If you don't have a very big financial cushion
[00:12:42.890]of course you cannot take much risk in not having more money
[00:12:46.620]coming in versus what is flowing out in any given year.
[00:12:50.870]And then the fourth or fifth piece in a marketing plan
[00:12:54.050]that is key is to write down
[00:12:57.350]how you can best accomplish your marketing goals
[00:12:59.790]and objectives.
[00:13:00.623]Given the tools you have available
[00:13:02.040]what you're trying to achieve, what it is you're selling,
[00:13:04.760]where and when,
[00:13:06.040]what is it that you can do
[00:13:07.390]to best try to achieve those goals and objectives?
[00:13:12.280]So here's a sample livestock marketing plan
[00:13:14.640]that I've been using in an extension
[00:13:16.120]and in the classroom for the last few years.
[00:13:18.600]And it's a very simplistic view
[00:13:21.040]of a lot of a marketing plan.
[00:13:23.380]You could do something similar to this on paper
[00:13:26.870]and a very just handwritten note.
[00:13:28.680]You can develop something much more complicated than this
[00:13:31.870]however you like,
[00:13:32.703]but this is trying to get at that very nuts and bolts
[00:13:34.730]of what I had there previously
[00:13:36.120]in terms of what goes into it.
[00:13:37.950]The top part is for identifying
[00:13:39.700]what it is you plan to sell,
[00:13:41.840]when it is your plan to sell it.
[00:13:43.970]Okay?
[00:13:44.803]So in this case, a cow herd,
[00:13:47.340]I think I did this for a 400 head cow herd
[00:13:50.310]with I would end up with
[00:13:52.070]once you take into breed up and winning percentage
[00:13:54.420]and such and such and retaining heifers,
[00:13:56.940]that ended up about 170 weaned steer calves to sell
[00:14:00.190]and 103 weaned heifer calves to sell right
[00:14:03.190]in that 550 to 600 pound range on October 25th.
[00:14:06.820]So identify what it is that you're trying to sell.
[00:14:10.080]Marketing plan one is for the weaned steers
[00:14:12.770]you would hit create something very similar to this
[00:14:15.050]to the weaned heifer calves.
[00:14:17.240]But for the weaned steers,
[00:14:18.410]you take a look at what's in the market
[00:14:20.570]in terms of price expectations.
[00:14:22.231]And I suggest
[00:14:23.550]that you don't just look at what people tell you
[00:14:25.230]they expect the prices to be in October
[00:14:28.660]but also look at the range of possibilities there
[00:14:31.730]or add those ranges yourself with an educated guess
[00:14:35.300]in this case,
[00:14:36.350]expectations are for 175 a 100 weight
[00:14:39.750]in the marketplace in October
[00:14:41.690]but we put a range around that.
[00:14:43.220]If anywhere from a low of 150 to a high of 195.
[00:14:47.540]Also plugged in the expected cost of production
[00:14:50.190]on the previous work that I had on here.
[00:14:53.609]In that example, we were looking at mid 170 range,
[00:14:57.360]went ahead and just said, you know,
[00:14:58.700]put a little fudge in there and put that at 180
[00:15:00.880]for the expectations.
[00:15:02.220]Under great conditions we might be able to cut some costs
[00:15:04.980]somewhere along the way and drop that to 170 a 100 rate
[00:15:08.213]but it also might end up being more expensive
[00:15:11.024]and moving up to 190.
[00:15:13.460]When I say great conditions,
[00:15:15.020]of course that can come from different changes in costs
[00:15:18.780]as far as dollars and expenses,
[00:15:20.820]but it also can come from different performance
[00:15:23.780]of the calves.
[00:15:24.650]If you have the same expenses
[00:15:26.310]and weighing lighter weight calves,
[00:15:27.690]that cost of production will go up per 100 weight.
[00:15:31.180]If you have the same expenses
[00:15:32.550]and get better performance and wean heavier calves
[00:15:35.530]that cost of production will go down.
[00:15:37.310]So a lot of things can factor
[00:15:38.630]into what your actual cost of production will be.
[00:15:41.690]But in general,
[00:15:42.540]if you know a pretty good handle
[00:15:43.970]on where you're at with that 180
[00:15:45.390]it shouldn't vary near as much as the possibilities
[00:15:48.480]of what could happen out there in the marketplace.
[00:15:52.020]So given that a person but then set goals
[00:15:54.700]and objectives, okay?
[00:15:56.390]And given that they expect their cost
[00:15:58.010]of production to be 180
[00:15:59.340]and they're looking at prices at 175
[00:16:02.460]they might set some goals right around that,
[00:16:04.260]right there in terms of how much chance
[00:16:06.910]they're willing to take
[00:16:07.760]that they don't cover their cost of production.
[00:16:10.550]In this case this person wrote down
[00:16:12.220]that they would like to have a marketing plan
[00:16:14.990]that leaves them with less than 20% chance
[00:16:18.010]of receiving an average price below 170.
[00:16:22.320]So they figured that's a low case scenario
[00:16:24.950]on their cost of production.
[00:16:27.600]You know, any price below 170 means
[00:16:29.880]they really have no chance
[00:16:31.130]of covering the cost of production,
[00:16:32.897]and they would like to limit that to no more than 20%.
[00:16:36.930]So they're gonna put marketing tools in place
[00:16:39.110]or take some marketing practices
[00:16:42.310]throughout the year to try to get some prices locked
[00:16:45.680]in above that 170 range.
[00:16:48.460]The second goal that they set is to maintain a chance
[00:16:51.170]of receiving an average price of 180s.
[00:16:53.800]They want a good chance
[00:16:54.856]of covering their expected cost of production.
[00:16:58.440]So if somebody came along
[00:17:00.060]and offered them the opportunity to lock in 170
[00:17:03.290]they wouldn't take it.
[00:17:04.920]It would definitely meet their first goal
[00:17:09.030]but it would not meet their second one.
[00:17:12.580]And then the third piece here is fairly personal
[00:17:15.350]to this situation.
[00:17:16.270]They wanna leave open the opportunity to retain 40 head
[00:17:19.430]of these steers and feed them out to slaughter weight.
[00:17:24.290]With that in mind,
[00:17:25.570]they're not gonna wanna lock in delivery of all 170 head
[00:17:28.840]to any one individual
[00:17:30.700]or the will be sacrificing this objective
[00:17:34.220]that they have here to at least have that opportunity
[00:17:36.510]when the time comes to retain those calves,
[00:17:39.700]if they wish.
[00:17:42.200]So that's just a sample
[00:17:43.380]of some goals that people might write down
[00:17:45.200]and decide on that it's tied to the cost of production,
[00:17:47.610]what's available in the marketplace
[00:17:49.580]and how they might do that.
[00:17:52.210]The two strategies that are listed here,
[00:17:54.090]one, the first strategy involves looking
[00:17:56.440]at the national marketplace
[00:17:57.750]and say there's a lot of risks there
[00:17:59.480]in terms of where these markets will move
[00:18:01.650]let's do something to help put a floor under that.
[00:18:04.970]Price, that's motivated by objective two
[00:18:09.430]or they're trying to at least maintain some upside
[00:18:12.110]so they wouldn't wanna lock it in so to speak
[00:18:14.210]but they do wanna have the opportunity
[00:18:16.220]or wanna do some protection
[00:18:19.210]so that they don't have too high of a probability
[00:18:22.640]of dropping below that 170,
[00:18:24.270]which is related to objective one.
[00:18:27.220]There's lots of tools that you can use.
[00:18:28.760]One of the tools is LRP Insurance
[00:18:30.690]or the Livestock Risk Protection Insurance
[00:18:32.970]which operates like a put option
[00:18:37.200]and it doesn't,
[00:18:38.420]it ensures your price on a national basis
[00:18:40.770]but it doesn't obligate you to actually sell the animals.
[00:18:44.010]And the reason they would pick this would obviously be
[00:18:46.530]that they do wanna maintain that,
[00:18:48.430]that upside potential in the marketplace,
[00:18:51.680]which is what a put option does,
[00:18:53.630]and they don't wanna actually have to lock
[00:18:55.410]in having to deliver all of their animals
[00:18:57.910]or most of their animals here,
[00:19:00.120]'cause they wanna keep 40
[00:19:01.940]the opportunity to retain 40 head, which is objective three.
[00:19:06.180]So they decide that they wanna check into that.
[00:19:09.790]They're gonna complete an application by March 31st,
[00:19:12.480]they're gonna analyze whether to do a 26-week policy
[00:19:17.120]by April 15th,
[00:19:18.050]which would carry them out to that October mid-October date
[00:19:21.920]for delivery.
[00:19:23.140]And then they all,
[00:19:24.880]and then later in the year and mid June
[00:19:26.840]they wanna do that again with the 13-week LRP policy.
[00:19:31.220]So they look at their tools that they have available
[00:19:34.330]to look to set some firm action plans
[00:19:37.050]for when and how they wanna explore this tool
[00:19:40.640]and see if they can meet those goals and objectives with it.
[00:19:44.630]The second strategy is to look at cash sales
[00:19:47.110]to lock in delivery price
[00:19:49.130]on part of the production to limit that downside risk.
[00:19:51.800]Keep in mind, this is obligating them to deliver
[00:19:55.610]so they wanna be careful on not doing this.
[00:19:57.438]Trying to leave at least 40 head unpriced
[00:20:00.700]with this strategy,
[00:20:02.330]but they say by June 30th
[00:20:03.750]they're gonna go ahead and contact two potential buyers,
[00:20:06.160]make sure they have that in place.
[00:20:08.430]10 days later on July 10th,
[00:20:09.950]they wanna have had a chance
[00:20:12.730]to analyze those cash sales contracts,
[00:20:15.260]see how they compare to the expectations in the marketplace,
[00:20:19.100]LRP policies they have in place, et cetera.
[00:20:21.780]And then by July 15th, they wanna make that decision.
[00:20:24.380]So this is just an example
[00:20:26.490]of a livestock marketing plan
[00:20:28.070]that somebody could write down for their cow,
[00:20:31.410]cow-calf operation
[00:20:32.480]in this particular case for the steer calves
[00:20:34.900]where you just try to set some goals and objectives
[00:20:39.280]that max market conditions and your cost of production
[00:20:42.490]or your willingness to take chances,
[00:20:44.600]lay out some strategies with some deadlines
[00:20:47.500]and actions to help you meet those goals and objectives.
[00:20:52.740]Okay?
[00:20:53.573]So which of the following best describes
[00:20:54.650]your marketing plan situation
[00:20:57.190]that you actually have a written marketing plan
[00:20:59.100]does have to look exactly like the one below before,
[00:21:01.620]but that you could actually pull out a marketing plan
[00:21:03.400]on paper and show it to somebody if they asked for it
[00:21:06.580]and that you have fun, but it's completely in your head.
[00:21:09.870]You can't really show it on paper to anybody
[00:21:12.190]or you don't have one.
[00:21:13.330]When I ask this question at extension meetings
[00:21:15.910]I typically get these types of answers.
[00:21:18.160]Very seldom did people actually
[00:21:20.420]have a written marketing plan
[00:21:21.618]that they can actually show somebody if they were asked to.
[00:21:25.930]And the audience is usually split 50 50
[00:21:28.640]on saying that they have the marketing plan
[00:21:31.290]but it's in their heads or they openly in bed.
[00:21:34.240]They don't really have a marketing plan at all.
[00:21:36.830]So keep that in mind when you,
[00:21:38.990]somebody comes along and says, well, why are you doing that?
[00:21:41.339]It's because it helps you increase the odds
[00:21:44.970]that you reach your objectives
[00:21:46.370]of covering your cost of production,
[00:21:48.580]and it also puts you ahead of most cattle producers
[00:21:52.370]in that regard, 'cause most of them are doing this.
[00:21:55.080]And that's why we typically get situations
[00:21:58.210]where cattle producers aren't making a lot of money
[00:22:01.297]and years where markets aren't working in their favor
[00:22:04.350]or cost of production is run, runs a little bit high.
[00:22:07.930]So I'm gonna end at that here,
[00:22:09.750]in terms of this little segment,
[00:22:11.476]now that we've looked at why
[00:22:12.900]you should have a marketing plan.
[00:22:15.720]And in the next one episode,
[00:22:17.340]I'll look at different tools
[00:22:18.900]that are available for you besides LRP,
[00:22:21.360]I'll talk about that one,
[00:22:23.480]talking about some of the other tools that are available
[00:22:25.190]and how to understand
[00:22:26.500]what they do for you in the marketplace.

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Livestock Marketing - Why do you need a marketing plan?

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