Livestock Marketing Risk
Marketing is that part of your business that transforms production activities into financial success. Unanticipated forces, such as weather or government action, can lead to dramatic changes in crop and livestock prices. As agriculture moves towards a more global market, these forces stem increasingly from world factors. Other farmers’ weather and other governments can affect your prices. When these forces are understood, they can become important considerations for the skilled marketer. Marketing risk is any marketing related activity or event that is uncertain leading to the variability and unpredictability of prices that farmers both receive for their products, and pay for production inputs. (After National Crop Insurance Services’ Crop Insurance and Risk Management Primer, Risk Overview, page 35.)
Today’s challenging market characteristics bring increased opportunity and increased risk to livestock producers. In such an environment, producers should approach marketing decisions with an informed, balanced, and strategic approach. Successful implementation of available marketing tools and strategies depends on producers understanding the risks and rewards involved with each marketing decision. By understanding marketing opportunities and risks, producers can add significant value to their operations through proper marketing of animals.
Two articles are presented on the topic of Livestock Marketing Risk:
- From the National Crop Insurance Services’ Crop Insurance and Risk Management Primer, we provide an article by Dr. Laurence M. Crane entitled Marketing Risk.
- From the Montana State University's Duane Griffith, we provide "Risk and Resilience in Agriculture - Why Marketing."
These articles were selected for their relevance, ease of understanding, and completeness; however, they do not provide an exhaustive discussion of livestock marketing risk. Readers desiring additional information about livestock marketing risk are encouraged to explore the reference links provided below.
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Western Risk Management Library: http://agecon.uwyo.edu/RiskMgt/DEFAULT.htm
National Ag Risk Education Library: http://www.agrisk.umn.edu/
Risk & Resilience in Agriculture: http://agecon.uwyo.edu/RnRinAg/Default.htm
Recognizing Risks: http://www.wvu.edu/~agexten/farmman2/riskmang/risk.htm
Managing for Today’s Cattle Market and Beyond: http://ag.arizona.edu/arec/wemc/TodaysCattlePub.html
Feeding and Marketing Cull Cows: http://ag.arizona.edu/arec/wemc/cattlemarket/FMCulCws.pdf
Retained Ownership of Cattle: Factors to Consider: http://ag.arizona.edu/arec/wemc/cattlemarket/Retained_Ownership.pdf
Hedging Using Livestock Futures: http://ag.arizona.edu/arec/wemc/cattlemarket/Hedgingusinglivestockfuture.pdf
Understanding Grid Pricing: http://ag.arizona.edu/arec/wemc/cattlemarket/Understanding_Grid_Pricing.pdf
Basis Forward Contracts: http://ag.arizona.edu/arec/wemc/cattlemarket/Basisforwardcontracts.pdf