Dr. Stephen Koontz, of Colorado State University, is shining a light on a rather complicated, but incredibly important part of how cattle prices are currently set.
Markets and marketing evolves over time, and the cattle industry is no different. Koontz says that the strong transition from a negotiated cash trade, to formula and forward pricing has created unintended consequences and ones that the industry needs to address in order to maintain transparency and functionality in the cattle markets.
In this interview filmed at the 2014 Canfax Market Forum, Shaun Haney sits down with Koontz to talk about why forward contracting and formula pricing makes sense, but also how a move to formula pricing has shrunk the cash market significantly. This means very few trades are actually setting the price for the majority of the cattle sales happening — what does this mean for marketing? Koontz discusses that the industry needs to find ways to bring pricing transparency for price setting and reporting to the market.
Koontz and Haney discuss how the futures market is impacted as well, whether or not this is a problem the industry can deal with on its own, and how much, if at all, this is impacting Canadian cattle sales and pricing. Koontz ends by explaining the importance of an evolving marketing strategy and the danger of choosing to ignore change.