Marketing Practices of South Dakota Cattle Feeders

Cattle feeding is an important component of South Dakota's agricultural economy. In 1994, South Dakota collected an estimated $1,021 million in cash receipts from the beef industry, which accounts for 29% of the agricultural economy. The size and type of feedlot operations vary considerably within the state. Some small feedlots feed less than 100 head and some of the large feedlots feed over 10,000 head per year. Some of the feedlots feed only their own raised cattle, others purchase all of their cattle, and still others only custom feed cattle. There also are differences in the age, education, and experience of feedlot operators. The type and level of production and marketing risks vary with these different operations. The strategies used by operators to manage risk also will vary with type of feedlot and management ability. The objective of this thesis was to identify the marketing practices of South Dakota cattle feeders and to understand the reason for different marketing strategies. A survey was mailed to 300 members of the South Dakota Cattlemen's Association requesting information about their feeding operation and their marketing practices. There were 85 useable surveys returned and these were analyzed using appropriate statistical techniques. Size of feedlot was found to have a significant impact on several marketing practices. Differences in feedlot operator characteristics were of limited value in explaining differences in marketing practices. Few feedlots use the futures market to manage risk and set price. Most operators sell fed cattle on either a live or dressed weight basis. Most do not use the grade and yield method of pricing; however, most say they are in favor of a value based pricing system.