Livestock Economics

OSU agricultural economists help develop, deliver and lead a variety of beef educational programs through interdisciplinary teamwork.

Beef Extension

The Beef Extension website features management information for cow/calf and stocker producers through links to publications and calculator software tools.

OSU Beef Extension Program Page

Cow/Calf Corner

The Cow/Calf Corner features weekly newsletters discussing topics relevant to the cattle industry. The Decision Tools are software programs developed by OSU agricultural economists that are free for download.

2020 Newsletter

Fed Cattle Market Simulator

The Packer-Feeder Game provides cattlemen an opportunity to sharpen their fed cattle marketing and purchasing skills in a fun, game-like environment. The game provides a realistic market for fed cattle and live cattle futures. Participants role play as cattle feedlot managers trying to market cattle at a profit and as packing plant managers trying to buy cattle at a profit. Actions by players direct market prices. Workshops require 24 and can accommodate up to 50 participants. Workshop length varies from four to about 14 hours.

The Fed Cattle Market Simulator was developed by Dr. Clem Ward, Dr. Jim Trapp, Dr. Derrell Peel, and Dr. Steve Koontz, all livestock marketing economists. Clem, Jim, and, Derrell are at Oklahoma State University and Steve is at Colorado State University.

Participants

Learn to compute feedlot break-even prices for fed cattle.
Find out how to estimate packer break-even bid prices for cattle and how to determine the number of cattle packers need.
Bargain head-to-head to negotiate cash prices or forward contracts.
Determine how to best market three genetic types of cattle either on live weight, dressed weight, or with a price grid.
Use the futures market to hedge sales or purchases.
Use financial statements to plan your marketing/buying strategy.
See the dynamics of the market over time.
See who has the bargaining edge when cattle supplies are tight - and when cattle supplies are plentiful.
Try to out-compete their peers!

FCMS Overview

Eight feedlot teams of 2-4 people market fed cattle.
Four meatpacking teams of 2-4 people purchase fed cattle.
Cattle supplies are exogenously controlled and cycle from larger to smaller to larger supplies.
Cattle can be marketed/purchased any time during a five-week market window at weights ranging from 1200-1300 lbs.
Cattle genetics range from low quality, high yielding to high quality, low yielding.
Feedlots are penalized for feeding to excessive weights but packers have an incentive to purchase heavier cattle.
Each packer has a different cost structure and minimum cost volume.
Feedlot and packer teams negotiate sale/purchase prices in seven-minute trading weeks.
Cattle can be priced on a live weight, dressed weight, or grid method.
Teams can trade futures market contracts (one nearby and two distant contracts) and forward contract cattle.
The beef demand function is based on a nine-week polynomial lag model estimated with weekly beef industry data.
Market News reports within-week trading activity (volume, contracts, high and low prices) and end-of-week market summaries (volume, prices by weights, boxed beef price, cost of gain, feeder cattle purchase price).
Cattle on Feed reports are presented monthly.
Teams receive weekly profit/loss statements.
Ego awards, "Best team trophy" and "Best supporting team ‘gold and silver cow chips on a shingle’ trophy" are given monthly.
Each workshop ends with a "lessons learned" debriefing period and an evaluation form.

Livestock Market Information

Below is a list of links that provide market information to benefit producers.

Master Cattlman

The Master Cattleman program aims to enhance the profitability of beef operations and the quality of life of beef cattle producers by equipping them with vital information on all aspects of beef production, business planning, risk management and marketing through an educational curriculum based on the Oklahoma Beef Cattle Manual and a producer certification process.

OSU Extension Master Cattleman Program Page

Meat Goat Production

The Oklahoma Cooperative Extension Service offers a variety of meat goat educational programs and materials to meat goat producers in Oklahoma and across the United States.

OSU Extension Meat Goat Production Program Page

Pricing and Price Discovery Issues

Price discovery is an on-going concern to many in the livestock industry. Similarly, price discovery has been a topic of research and extension education at Oklahoma State University for more than two decades.

Price discovery is frequently confused with price determination. These are two related but different concepts that need to be understood. Price discovery involves the process of buyers and sellers arriving at a transaction price for a given quality and quantity of a product at a given time and place. It involves several interrelated concepts, among them market structure (number, size, location, and competitiveness of buyers and sellers); market behavior (buyer procurement and pricing methods); market information and price reporting (amount, timeliness, and reliability of information); and futures markets and risk management alternatives.

Low (and high) livestock prices are related to price determination factors, not price discovery factors. Low (and high) prices result from supplies that are large (small) relative to current demand conditions. Variation in week-to-week or daily prices across sale lots of livestock, both above and below the market price level, result from many factors directly affecting price discovery, and which include pre-committed supplies, market information, and buyer concentration. Livestock firms can do little about the broad forces that affect price level (price determination), but they can take steps that affect prices paid for individual sale lots (price discovery).

Dr. Clem Ward has spent much of his career studying distinguishing features of price determination and price discovery. Publications and presentations listed in these pages include information related to understanding the mechanics of how meatpacking firms price livestock and meat. Much of the most recent work has focused on grid pricing.

Presentations

Production Marketing Interrelationships

Livestock production and marketing are interrelated. Ideally, before production begins, producers have a plan to target their production to a specific market segment or customer group. Selling is simply converting what is produced into cash or income. Marketing involves knowing your customers, recognizing their needs, and working to meet those needs through production, processing, and distribution. Marketing involves creating value for buyers in time (meeting customers’ needs on a certain day, week, or month), place (meeting customers’ needs at a specified location), and form (meeting customers’ needs for a given quality).

Some of Dr. Ward’s extension and research has involved projects that span the boundary between livestock production and marketing. Presentations and publications listed in these pages focus on topics related to the cow-calf segment of the beef industry.

Presentations

Structural Changes in Meatpacking

The structure of production agriculture, food processing industries, and the retail and food service industries are constantly changing. Market structure affects the behavior of firms. Rapid changes have taken place in the meatpacking industry. The causes and consequences of these structural and behavioral changes in meatpacking is a contentious issue for many.

Causes of structural changes are related to economies of size in production, processing and distribution. They are influenced by changes in demand for red meats and poultry. How much they are influenced by the drive for market power and profits is a highly debated topic. Clearly, mergers and acquisitions have increased the rate of consolidation among meatpacking firms. The consequences of structural and behavioral changes are equally controversial. The decreasing number of buyers along with their increase in absolute and relative size affects competition and price discovery. The increase in buyer concentration and consolidation leave many to conclude that meatpackers have excessive market power and domination.

Dr. Clem Ward has spent much of his career following structural and behavioral changes in meatpacking. He authored the book, Meatpacking Competition and Pricing in 1988. Both in research for the book and work since then, he has studied economies of size in slaughtering and fabricating, price discovery and pricing methods, and competition impacts on fed cattle prices, and effects of captive supplies on fed cattle prices.