#45 - Ted Schroeder, Markets...and the People Who Make Them
Oct 25, 2023
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In this episode, Dr. Ted Schroeder, Professor of Economics at Kansas State University, discusses the importance of ag economics and provides valuable tools and information for making informed decisions in the industry. He also explores market prices and trading in the cattle industry, fluctuations, adaptation, and consumer demand in the hog and cattle industries. The debate surrounding farming subsidies and the participation of grass folks is also discussed. Lastly, the episode focuses on the vision, passion, and innovation needed to improve and advance the beef industry, as well as optimizing animal performance and genetic selection.
The need to update reporting methods to capture the dynamics of the modern beef industry.
The importance of contracts in price discovery and the ongoing negotiation and adjustment of various components.
The shift towards value-based pricing and branding in the beef industry driven by retailer demands and consumer preferences.
Deep dives
Dr. Ted Schroeder's Extensive Work and Contributions to Production Agriculture
Dr. Ted Schroeder, a professor at Kansas State University, has spent almost four decades working with various groups and segments of the agricultural industry to contribute to the betterment of production agriculture. His extensive research projects, papers, lectures, and presentations have focused on a wide range of subjects, with a particular emphasis on beef industry topics such as beef demand calculation, consumer behavior, and the effects of captive supply on the beef marketplace and price discovery. Dr. Schroeder's passion for finding ways to keep producers profitable and his commitment to seeking out the best tools and information for decision-making have made him a respected figure in the industry.
The Importance of Price Discovery in Fed Cattle Markets
Price discovery in fed cattle markets remains a crucial and evolving topic that has been the focus of Dr. Schroeder's work throughout his career. The shift from voluntary reporting to mandatory reporting has improved the depth, detail, and reliability of data on fed cattle prices. However, the reporting methods have not kept pace with the transformation in how fed cattle are sold, with a significant shift towards formula and grid pricing. This has led to increased price variation and challenges in accurately measuring prices. Dr. Schroeder emphasizes the need for updating reporting methods to effectively capture the dynamics of the modern beef industry.
The Role of Contracts in price Discovery and Market Relationships
The cattle contracts library introduced by USDA provides valuable information on the types of contracts packers use in their procurement, including base prices, premiums, discounts, and transaction volumes. The library reveals that a significant portion of contract base prices still relies on cash markets such as Nebraska, Kansas, and Texas, despite potential concerns about price variation and representativeness. Dr. Schroeder highlights the importance of contracts in price discovery and explains that while negotiated cash prices represent a smaller percentage of trade, all contracts involve negotiation and the ongoing assessment and adjustment of various components, such as choice-select spreads, based on market conditions.
The Transition towards Value-Based Pricing and Branding
Dr. Schroeder discusses the shift towards value-based pricing and branding in the beef industry, driven by retailer demands for product specifications and consumer preferences. This transition has led to a proliferation of brands and the creation of numerous value-added products to meet specific customer requirements. It has also influenced the way cattle are sourced, as producers need to supply cattle that can meet these specifications. The coordination between producers, packers, and retailers in capturing consumer preferences and providing a consistent and reliable supply of value-added products has been a key factor in the industry's success.
The Challenges of Subsidies and the Importance of Maintaining Industry Competitiveness
Although some sectors of agriculture have received subsidies and government support, Dr. Schroeder cautions against becoming too reliant on these programs. He believes that industries heavily dependent on subsidies can become less competitive and innovative, as decisions and profitability become influenced by political factors. While acknowledging that certain safety nets may be necessary in some situations, he encourages the industry to focus on maintaining its competitive edge through passion, innovation, and customer-centric approaches rather than relying solely on government assistance.
Dr. Ted Schroeder is a Professor of Economics at Kansas State University. His research on livestock marketing and price analysis provides information and direction for the livestock and grain industries. This research focuses on improving commodity market efficiency by investigating price discovery methods, improving market coordinating mechanisms, and applied risk management. Schroeder also teaches courses in marketing and risk management.
