1. Home
2. Conferences
3. 2017 Extension Risk Management Education National Conference

Reducing Financial and Marketing Risks through Understanding Livestock Price Signals

Doolarie SIngh-Knights and Marlon Knights

Summary

Lamb sales presents an important income potential for small family farms in the Appalachian region due to the proximity to large Eastern markets. The growth of specialty lamb markets in the Northeast appears to have altered long-established regional price determinants and lamb markets may have changed product characteristics for which price premiums and discounts are offered. Lack of understanding of such price signals results in a failure to align management practices to better meet consumer expectations. Small and medium sized livestock producers are generally “price takers,” and face significant financial and marketing risks associated with fluctuating prices and structural changes in the market, which lower profitability and sustainability and can ultimately exacerbate industry exit.

The goal of our study was to identify factors that influence price of lambs at local/regional markets which can be used to develop appropriate risk mitigation strategies. Data from 8 markets in West Virginia over 14 years (2003-2016) was analyzed using ANOVA procedures to determine the effects of market location, timing of sale, class, grade, quantity sold, and proximity to regional markets on price. The presence of significant main effects and interactions on market price suggest a practical opportunity exist for producers to modify their production and management systems, and marketing strategies, to mitigate financial and marketing risks, and capitalize on price differences. This study presents a methodology that can be replicated in other regions and with other livestock species, and be used to educate producers on using price signals to make valuable risk management decisions.

Details

---