KOHLS

1
KOHLS UHL CHAPTER 10

• FARM AND FOOD PRICES

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CHAPTER 9 REVIEW

• A. Competition Is A Concern
• B. Key Competition Characteristics 1. No. Of
  Sellers
• 2. Product Differentiation
• 3. Influence On Price
• C. Food Competition Based Largely On Product
  Differentiation
• D. Strive For Workable Competition

3
Course Concepts

• Wk 6 Kohls Ch 1o Food Farm Prices
• Kohls Ch 11 Food Mkting Costs
• Wk 7 Kohls Ch 12 Chgs In Food Markets
• Kohls Ch 13 Coops In Food Indust
• Wk 8 Kohls Ch 14 Mkt Development
• Kohls Ch 1 5 Mkt Bargining Power
• Wk 9 Kohls Ch 16 Market Information
• Kohls Ch 1 7 Standards Grades
• Wk 10 Kohls Ch 18 Transportation
• Kohls Ch 19 Storage
• Wk 11 Team Presentations

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Learning Objectives After This Lesson, The
Student Should Be Able To
Kohls Uhl Chapter 10 Farm And Food Prices

• 1. Indicate The Degree Of Control Over Price
  Influencing Factors
• 2. Differentiate Between Price Discovery Stages
• 3. Compare Contrast Price Discovery Systems
• 4. Discuss The Reasons Farm Prices Fluctuate.

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I. Factors Influencing Prices
Learning Objective
Indicate The Degree Of Control Over Price
Influencing Factors
1

• U.S. Farmers
• Influence Control

A. Supply Conditions
Yes
1. Production Decisions
Yes
2. Weather
No
No
Yes
Some
3. Disease/Weeds/Bugs
No
4. Food Imports
Some
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Learning Objective
Indicate The Degree Of Control Over Price
Influencing Factors
1

• U.S. Farmers
• Influence Control

B. Demand Conditions
No
No
1. Consumer Income
2. Consumer Prices
No
No
3. Consumer Tastes
No
Some
4. Exports
No
Little
No
No
5. Population Growth
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Learning Objective
Indicate The Degree Of Control Over Price
Influencing Factors
1

• U.S. Farmers
• Influence Control

C. Food Marketing Sector
No
No
1. Processing Activities
No
No
2. Procurement Strategies
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Learning Objective
Indicate The Degree Of Control Over Price
Influencing Factors
1

• U.S. Farmers
• Influence Control

D. Government Policies
No
Little
1. Trade Policies
Yes
2. Price Supports
No
3. Currency Exchange Rates
No
No
4. Inflation
No
No
5. Unemployment
No
No
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II. Price Discovery Stages
Learning Objective
Differentiate Between Price Discovery Stages
2

• A. Estimate

Supply
Demand
1. Private Firms 2. Govt Reports
B. Estimate Market Clearing Price
Futures Market
C. Adjust Price For 1. Quality Grade 2.
Services 3. Location
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III. Price Discovery Systems
Learning Objective
Compare Contrast Price Discovery Systems
3

• A. Individual Negotiation
• 1. Private Treaty (Packer Buyer)

2. Reduced Transportation Cost
3. Reduced Transaction Cost
4. Higher Search Cost
5. Depends On Bargining Skills
6. Decentralized, No Intermediaries
B. Bargained Prices
Comm Of Buyers Sellers Est Mkt Clearing Price
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C. Organized Central Markets(Chicago Bd Of
Trade, Auctions)
Learning Objective
Compare Contrast Price Discovery Systems
3

• 1. Higher Transportation Cost
• 2. Full Immediate Public Info
• 3. Higher Transaction Cost
• 4. Probably Most Price Efficient
• 5. Equal Market Power
• 6. Most Uniform Price
• 7. Competitive Bidding

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Learning Objective
Compare Contrast Price Discovery Systems
3
8. Types
1. English Auction A. Low To High Price B.
Sometimes Results In Higher Prices

• 2. Electronic Auction Markets
• A. Decentralized
• B. Usually An Auction Or Exchange
• C. Low Transportation Costs
• D. High Costs Per Transaction (So Far)

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Learning Objective
Compare Contrast Price Discovery Systems
3
3. Dutch Auction A. High To Low Price B. Quick
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D. Formula Pricing
Learning Objective
Compare Contrast Price Discovery Systems
3

• Prices Set According To Math Formula
• Less Responsive To Changing Conditions
• 3. Reduces Bargining Cost And Time
• 4. Reduces Price Variability

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Learning Objective
Compare Contrast Price Discovery Systems
3
E. Administered Prices (Posted Bid) 1. Govt
Fed Milk Mkt Order Price 2. Private Local
Elev Price Board
3. Usually By Govt In Times Of Emergency
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IV. Farm Price Fluctuations
Learning Objective
Discuss The Reasons Farm Prices Fluctuate
4

• A. Price Trends
• 1. Ag Non-ag Prices Move Together Over The
  Long Run

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2. Farm Prices Vary More Than Retail
Learning Objective
Discuss The Reasons Farm Prices Fluctuate
4

• A. Time Lag
• B. Multiple Uses
• C. 75 Of Price Is Mkting Cost
• D. Consumers Dont Like Varying Prices

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2. Farm Prices Vary More Than Retail
Learning Objective
Discuss The Reasons Farm Prices Fluctuate
4
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B. Price Fluctuations
Learning Objective
Discuss The Reasons Farm Prices Fluctuate
4

• 1. Business Cycles
• A. Boom

Inflation
B. Bust
Recession
C. Domestic
D. Foreign
E. Easier For Non-farm To React
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2. Production Cycles
Learning Objective
Discuss The Reasons Farm Prices Fluctuate
4

• A. Supply Based
• B. Plans Based On Current Prices
• C. Over Several Years

D. Psychological Lag
Convince Time
E. Physiological Lag
Hogs
1. Short
2. Long

Beef/Dairy
3. Factors A. Age To Maturity B. Gestation
Period
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3. Seasonal Cycles
Learning Objective
Discuss The Reasons Farm Prices Fluctuate
4

• A. With In A Marketing Yr
• B. Reasons
• 1. Seasonal Production
• A. Vegetables
• B. Fruit

2. Seasonal Demand
A. Thanksgiving B.
Christmas
Ham
3. Marketing Pattern
4. Cost Of Storage
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4. Daily Fluctuation
Learning Objective
Discuss The Reasons Farm Prices Fluctuate
4

• A. Supply

B. Demand
C. Weather Reports
D. Market New Serve Reports
E. Foreign Grain Deals
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V. Summary
Kohls Uhl Chapter 10 Farm And Food Prices

• A. Prices Vary In Trends, Cycles, Seasonally And
  Daily
• B. Ultimately, Supply Demand Determine Prices
• C. Farm Retail Prices Move Together Over Long
  Run

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Kohls Uhl Chapter 10 Farm And Food Prices

• __ 1. Price Discovery Stage
• __ 2. Most Eff Mkt System
• __ 3. Elevator Grain Board
• __ 4. Long Production Cycle
• __ 5. Seasonal Demand
• __ 6. Production Decisions
• __ 7. Why Retail Price Chg Less
• __ 8. Long Term Price changes
• __ 9. Depends On Bargining Skill
• __10. Inflation Recession

A. Beef/Dairy B. Business Cycles C. Central
Mkts D. Est Supp Demd E. High Mkting Cost F.
Indiv Negations G. Lg Farmer Influ H. Admin
Prices I. . Turkey J. Trends K. None Of Above
D
C
H
A
I
G
E
J
F
B