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Raising
cattle can be a risky business, and no single factor
can be as critical to your profit margin as how, when,
and where you market your cattle.
Fluctuating prices, changes in demand, variable
supplies, the weather, and any other number of factors
can affect the price you receive when you market your
cattle. How can you be sure that you are
getting the best price?
Is forward contracting a viable option for you?
Knowing
your cost of production can help you to determine what
the minimum price is that you can take on your cattle
and still make a profit.
Utilizing the Tend-R-Leen Economic Projection
Program (available to download at our web site or by
calling 1-800-328-8752) is an excellent way to do
this.
In
addition to the desired price you wish to get, you
also need to consider the time of year you will be
marketing your cattle, the number of cattle you have
to sell, and your geographical location and distance
from your market destination.
Packer (forward) contracts: Forward
contracting is a long term marketing agreement between
producer and packer.
It helps you lock in a price for
livestock to be delivered at a particular time to a
set specification. When used properly, packer
contracts can help balance the 'boom or bust' syndrome
and enable you to better manage your cash flow.
However, there are some risks associated with
contracts. You
are bound by the contract to deliver cattle according
to the terms. If your cattle are not ready at the time the contract
is due, or if the current market price at your local
sale barn is higher than your contract price, you are
still obligated to fulfill the terms of the contract.
Also
to be careful of special contracts offered by people
other then the packer. Check fine print and understand
all the details to ensure you get the desired price
you want.
Currently the only packer aggressively seeking forward contracts
on Holstein steers is Packerland Packing.
Contact them for more information at
1-800-753-7724.
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