Using a Market Simulator in Extension Programs

Extension programs result from responding to adult and youth learners' needs, promoting programs which educators or others consider important, or the two combined. This article discusses the use of an experiential teaching/learning tool used in an Extension marketing program.

The Fed Cattle Market Simulator, labeled the "Packer-Feeder Game" by participants, is an experiential teaching/learning tool in which participants role play as cattle feedlot managers and meat packing plant managers (Koontz, Peel, Trapp & Ward, 1992). Since 1991, it has been used effectively with high school students, high school/vocational-technical school teachers, county/district Extension staff, agribusiness managers, and livestock producers. This Extension program has effectively sold itself. Demand for it has been generated by word of mouth from previous participants, and not by advertising through the program developers.

The following is a brief description of the market simulator, its relationship to experiential learning, and a summary of its extensive evaluation by participants.

Several types of simulators have been developed and used in teaching (Gentry, 1990). Development of the Fed Cattle Market Simulator began in 1990 and was enhanced by a U.S. Department of Agriculture Higher Education Challenge Grant in October 1991. Since then, the simulator has been used with Extension audiences in two-hour to two-day workshops on an "as requested" basis.

The Fed Cattle Market Simulator consists of 12, two-to-four person teams role playing in eight feedlots and four meat packing plants. Feedlot managers sell cattle from their feedlot when they reach acceptable finish weights, and meat packing plant managers purchase cattle for eventual sale as meat in a boxed- beef market. A live cattle futures market is also included. Thus, the focus is on negotiation and trading of fed cattle, either by cash transactions or by forward contracts, and trading of live cattle futures contracts. More important, however, is understanding the economics which translate into effective business strategies and successful negotiating.

The Packer-Feeder Game moves rapidly. The time reference in the simulated market is one week, and one week of game-time is simulated in an eight-minute cycle. During the first five minutes, cattle are traded among feedlots and meat packing plants. Each feedlot has several scanner forms, each representing cattle in five weight groups which are available for sale. Prices are negotiated among buyers and sellers. When trades are completed, specific transaction information is recorded on the form and scanned into the computer with software written for the simulator. Current market information (cash and futures market volume along with high and low cash prices and futures market prices for each live cattle contract traded) is updated every five seconds during the trading session and scrolled across a light bar on the screen.

After five minutes of trading, the trading period ends and financial reports are printed for each team. The software generates information to update weekly market information summaries (market volume, feeder and fed cattle prices, boxed beef prices, and feedlot cost of gain). Teams are able to track financial performance associated with their marketing or purchasing strategies. Thus, during the three-minute information processing phase (or weekend), each team updates its show list, estimates break-even bids or offer prices, evaluates the team's past performance, assesses market conditions, and adjusts its marketing strategies.

Instructors determine the market-level or macro supply scenario, allowing periods of large and small numbers of cattle. Thus, realistic market dynamics are integrated into the simulation. However, firm-level or micro decisions by participants determine the direction and performance of marketings, prices, and profits.

Kolb (1984) describes John Dewey's model of experiential learning as one emphasizing the learning that takes place following each completion of a circular set of stages: impulse, observation, knowledge, and judgment. Each completion of the loop provides feedback for the next loop, with all loop sequences ultimately targeted toward a specific purpose. Thus, Dewey's model stresses feedback in the learning process and indicates that learning occurs during the completion of each loop.

Dewey's model parallels participants' experiences with the market simulator. Each loop equates to a trading period. Each trading period has a unique impulse, consisting of a combination of past experiences and resulting information, plus new information. During the trading session, participants experience a period of observation, assimilating previous and current information into knowledge, and making strategy decisions or judgments. The result contributes to the next impulse or next trading period.

The experiential learning exercise with the Fed Cattle Market Simulator can be summarized as a process of continuous learning derived from each participant's individual and collective attitudes and behaviors. The ultimate result is the attainment of increased knowledge and skills. Compressing real time into shorter periods of game time allows participants to accelerate the experience from different market scenarios for the participant time invested. One strength of the simulator is that each participant operates at his/her own level and learns at his/her own pace. Participants with less academic or industry background function on a more basic level than more advanced participants who use sophisticated marketing and managerial plans. This robustness makes the simulator suitable for a wide variety of audiences and is especially appropriate for Extension audiences in which participants frequently have a diverse set of educational and industry backgrounds.

Each group of participants completes an evaluation of the experiential session. Two questions have been asked consistently. On a seven-point scale (one being best), 82.7% of participants rated the simulator's realism a three or better and 92% rated its effectiveness in teaching about markets, marketing, and pricing a three or better.

Below are several observations about the experiential learning process based on feedback from participants.

1. A key element of the experience is the realization that the collective action of participants determines the dynamics of the market environment.

2. Participants recognize that they must understand their business thoroughly as well as assess competitors' plans.

3. Transactions are conducted "face-to-face," emphasizing interpersonal communication and negotiation skills, dynamics which are difficult to capture with more traditional teaching methods.

4. Participants learn to delegate and accept responsibilities within their team, focusing on collecting and analyzing information and developing and implementing business strategies.

5. The simulator creates and capitalizes on teachable moments, offering real case studies in which to discuss why situations arise and the results stemming from them.

6. The simulated market creates a "need to know," encouraging self-motivation in participants' learning process.

7. The role-playing experience teaches economic principles and reinforces economic and business principles taught elsewhere.

8. An intangible product of the game is a realization of the need for sound business ethics.

9. Participants learn the importance of personalities in developing effective business relationships.

10. Switching roles from feedlot managers to meat packing plant managers often changes attitudes as participants experience both sides of the bargaining table.

11. The simulation experience reinforces the individual (micro) vs. group (macro) conflicts that often arise in markets.

12. The simulation experience fosters inductive versus deductive learning, synthesizing the whole from its component pieces rather than rules and procedures.

13. Participants better understand the need to develop sound but flexible strategies which are rooted in basic principles of economics and management.

In summary, experiential teaching/learning methods have not been used extensively in Extension agricultural economics. Success of the Fed Cattle Market Simulator provides concrete evidence that it is one experiential tool with considerable potential as an alternative method for teaching/learning agricultural marketing and pricing.

Gentry, J. W. (Ed.). (1990). Association for Business Simulation and Experiential Learning (ABSEL): Guide to business gaming and experiential learning. London: Nichols/GP.

Kolb, D. A. (1984). Experiential learning: Experience as the source of learning and development. Englewood Cliffs, NJ: Prentice-Hall.

Koontz, S. R., Peel, D. S., Trapp, J. N., & Ward, C. E. (1992, December). Experiential learning using a fed cattle market simulator: The "Packer-Feeder" game. Oklahoma Agricultural Experiment Station Research Report, p. 929.