Don't sell calves. Market them.
Noble Research Institute cattle economic consultants Dan Childs and Jason Bradley offer four ways to help you find more money when marketing calves.
1. Know your seasons.
Farmers know the seasonal trends of grain markets. But seasonal cattle markets are more complicated and less well understood, contends Bradley.
“You’ve got feeders, stockers, finished, and cull animals. Each is different.”
As an example, he uses USDA’s Ag Marketing Service (AMS) records to track lightweight (under 500 pounds) steer prices at Oklahoma City, Oklahoma, over several years. Prices peak early in the year, just ahead of the spring grass flush, often at a 5% premium to the year-long average. They bottom out in late summer.
As cattle get heavier, the price pattern shifts dramatically. Cattle over 700 pounds peak in late summer and fall as feedlot demand grows.
“Don’t extend beyond your capacity,” Bradley says about seasonal cattle prices. “For example, don’t move calving to the heat of August just to capture a higher market.”
2. Know the value of retained ownership.
What’s the right weight to sell calves? There’s help for this tough question from the AMS and the Chicago Mercantile Exchange (CME).
AMS publishes daily market reports for select livestock markets. These can provide a close estimate of what cattle are worth on that day. CME gives cattle price quotes for a future date. If you know your basis and projected cost of gain, you can compare the value of weight gain to your cost of weight gain.
“This is an estimate of profitability for retaining ownership,” Childs says. “You can do this exercise for each incremental amount of weight gain. When the value of gain dips below the cost of gain, you have reached the most profitable point to market cattle.”
For example, Childs shows the value of incremental gain from 350 to 900 pounds. It illustrates a general rule: Weight gain at lower weights is worth more than at higher weights.
If you’re in the stocker business, this exercise will help you know when to buy cattle. “If you can purchase the weight gain cheaper than you can put it on yourself, buy heavier calves until the value of gain exceeds your cost of gain,” Childs says.
3. Know your cattle’s attributes.
One of the best known is Certified Angus Beef. Black-hided cattle are worth more to some buyers.
Others with marketing value are health and preconditioning programs that verify good management. For instance, a program called VAC45 (value added calf, weaned after 45 days)has given an average sale-day bump of $11 or more per hundred.
Natural beef – no antibiotics, no hormones – is also an attribute. Some producers follow this, but fail to market it.
Verification is the big issue with attributes, Childs says. “You may need a third-party verifier to get the full value.”
One simple attribute is early castration. “Besides being more acceptable and less stressful on the animal, there’s an economic incentive for steers castrated early. Typically, the heavier the intact male, the more the discount,” he says.
4. Know your venues.
“We’ve compared market A with market B in the same geographic location, and there can be a consistent $10-per-hundredweight difference. For a truckload, that can turn a good day into a great day,” Bradley says, adding that certain attributes do better at one market over another. The trick is to find the venue that best represents your cattle.