Lecture 10: Agricultural Commodity Markets Flashcards Preview

AGEC2102: Agribusiness Marketing > Lecture 10: Agricultural Commodity Markets > Flashcards

Flashcards in Lecture 10: Agricultural Commodity Markets Deck (19):
1

Characteristics of livestock production (2)

- Face lengthy production periods
- Adjust future production to current prices

2

The livestock sector is subject to output price cycles

– Cycle may be integrated with other commodity markets, for example, eggs/poultry and pork cycles related to grain market
– Cycle may be speculative, for example, destocking/restocking with drought/rain conditions

3

3 reasons for livestock purchase

1. For breeding herds
2. For placement in feedlots or other fattening operations
3. For immediate slaughter
• Livestock assembly refers to bringing together animals for any of these purposes

4

Livestock assembly agents include: (4)

1. Local cooperative associations – collect the small lots from farmers and freight them to terminal markets
2. Country dealers – independent operators that buy and sell livestock for profit
3. Concentration yards – may operate independently or as a cooperative; similar to (and hard to distinguish) from country dealers
4. Terminal public markets – large central markets offering privileges of buying and selling the livestock

5

Reasons for changes towards direct marketing (4)

– Growing distance between farmers and consumers
– Refrigeration
– Improved transportation/additional transport options
– Consolidation of farms

6

Livestock processing

• Livestock processing, “Meat Packing” is a disassembling activity
• Composed of slaughterhouses and specialised meat processors
• A few dominant companies and many small ones
• Packers have not integrated forward into retailing, but have become further processors
• There is a tendency to backward integrate – for example, Coles buying slaughterhouses

7

Meat wholesaling

• Meat wholesaling sector is composed of merchant wholesalers, brokers, as well as branch sales offices of the slaughterhouses/butchers and the distribution warehouses owned by food retail organisations
• They move large quantities of product over long distances and maintain a high degree of freshness for perishable products

8

Factors affecting meat production and distribution (3)

1. Production
2. Processing
3. Retail

9

Factors affecting meat production and distribution: Production

– Fluctuating weather and climate change
– Fluctuating costs of feed and fuel
– Below-capacity operations

10

Factors affecting meat production and distribution: Processing

– Consolidation/dependence on major players
– Fluctuating livestock prices

11

Factors affecting meat production and distribution: Retail

– Competition between meat options
– Changing consumer preferences

12

Grains and oilseeds

• Used to produce food, feed, industrial products and increasingly biofuels
• Relatively large number of grain producers
• Tend to be relatively homogenous
• Associated with relatively small entry costs
• Market information is quite good, as lots of trading

13

Key agencies in grain and oilseed marketing channels

– Elevators (Silos)
– Commission merchants
– Brokers
– Processors and millers
– Exporters
– Grain exchanges

14

Elevators (silos)

– Farmers and country elevators (up-country) – independent elevators, cooperative elevators, line elevators (owned and operated as a chain)
– Terminal elevators – located in major grain marketing centres, much larger than country elevators, often hold grain for extended period of time, usually place of futures market trade/delivery

15

Commission merchants

– Commission merchants are representatives of country elevators in the terminal market
– For a fixed charge they accept the responsibility of selling grain
– They specialise in analysing market information for their clients

16

Processers and millers

– Two stages of processing food grains: milling and further processing
– For a fixed charge they accept responsibility of selling grain
– They also specialise in analysing market information for their clients

17

Factors affecting grains and oilseed marketing: Production

– Weather and climate change
– On-farm storage

18

Factors affecting grains and oilseed marketing: Processing

– Consolidation/dependence on major players

19

Factors affecting grains and oilseed marketing: Retail

– Competition in bakery products
– Private label expansion
– Changing consumer preferences
– Diverse range of end uses