Fall Feeder Cattle Marketing Options

ANR UpdateOctober 10, 2013

Kevin Laurent

UK Animal Sciences

Market Fundamentals

• Small cow-herd, getting smaller

• Domestic demand has improved– Exports still very strong

• Calf/feeder markets adjusting to feed prices

Livestock Marketing Information Center

Data Source: USDA/NASS

JANUARY 1 TOTAL CATTLE INVENTORYU.S., Annual

80

90

100

110

120

130

140

1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013

Mil. Head

2013 Cattle Markets

• Driven early by pessimism…– High grain prices– Wet spring– Softening exports

• Then a more pleasant reality…– Tight feeder supplies– Increasing corn supplies

CMEGroup© October Feeder Cattle Futures

SLAUGHTER STEER PRICES5 Market Weighted Average, Weekly

85

90

95

100

105

110

115

120

125

130

135

JAN APR JUL OCT

$ Per Cwt.

Avg.2007-11

2012

2013

Market Expectations

• Calves– Supplies very tight– Cheaper feed on the way– Strong spring feeder cattle market– Likely a counter seasonal market

• Heavier feeders– Fall: 7wts and 8wts well in the $140’s & $150’s– Much of the carry is gone– Likely a late fall peak in feeder cattle market

A few programs for this fall

Key Assumptions

1. Calf prices at weaning time

2. Sale prices at sale time

3. Feed prices

Changing from week to week!!

60 Day Backgrounding (Drylot)

• Value 550# steers in October at @ $1.60

• 2.5% BW 50 / 50 @ $200 per ton

• Fill out with hay

• 2.5 lbs gain per day

• 0.25 mineral per day @ $20 per bag

• Futures based sales price for 700# steer– ($7) basis, +$2 slide adjustment

60 Day Drylot BudgetSales # units unit price / unit totalFeeder 700 lbs $1.55 $1,085.00

ExpensesStocker 550 lbs $1.60 $880.00Hay 180 lbs $0.04 $6.30SBH / CG 938 lbs $0.10 $93.75Feed 2 0 lbs $0.04 $0.00Mineral 0.25 lbs / day $0.40 $6.00Vet / Med 1 head $15.00 $15.00Commision 1 head $6.00 $6.00Hauling 1 head $0.00 $0.00Interest 5% rate $8.23Death loss 1% $8.89

Total Expenses $1,024.17

Return to Land, Capital and Management $61

120 Day Backgrounding (Drylot)

• Value 550# steers at @ $1.60

• 2.5% BW 50 / 50 @ $200 per ton

• Fill out with hay

• 2.5 lbs gain per day

• 0.25 mineral per day @ $20 per bag

• Futures based sales price for 850# steer– $1 lower futures price, $6 additional slide

120 Day Drylot BudgetSales # units unit price / unit totalFeeder 850 lbs $1.48 $1,258.00

ExpensesStocker 550 lbs $1.60 $880.00Hay 420 lbs $0.04 $14.70SBH / CG 2,100 lbs $0.10 $210.00Feed 2 0 lbs $0.04 $0.00Mineral 0.25 lbs / day $0.40 $12.00Vet / Med 1 head $15.00 $15.00Commision 1 head $6.00 $6.00Hauling 1 head $0.00 $0.00Interest 5% rate $18.60Death loss 1% $8.89

Total Expenses $1,165.19

Return to Land, Capital and Management $93

BE Price $1.37 per lb

Alternative SystemsStocker/Backgrounders

• May need to be more forage oriented

• May need to grow them slower-longer

• Examples:– 90 day precondition feed on fall pasture– Green corn grazing – Fall bought calves on stockpiled grass for

summer sale

CPH Case Study – Fall 2012

• 55 calves – 86 days – fed on 25 acres past.

• 10-12 lbs 75:25 soyhull:gluten

• 12 rolls hay

• Start wt. – 548 End pay wt. – 762

• ADG – 2.49

CPH Case Study – Fall 2012

• Ending value 981.24

• Starting value 732.91

• Gross added value 248.33

• Expenses 176.76

• Net returns/head $71.57• Total net returns $3936.35

Green Corn Grazing

• 57 head Start wt. 720 lbs End wt. 826

• Grazed 47 days on 7.25 acres

• Supplemented at 2 lbs day DDGS

• Gained 2.25 lbs /day

• Corn costs $224/acre

• DDGS $300/ton

Grazed July 29 – Sept 14

Corn and feed costs/lb gain$0.42

Estimated at 170 bushel corn

Aftermath

Cows grazing aftermath

Example SystemWinter/Summer Pasture – 250 days

• Buy light calves in November when historically cheapest

• Graze until August and market when heavy feeders are historically highest

• Winter on stockpiled fescue and minimal supplement

• Feed hay only at receiving and snow/ice events

Strip grazing Stockpiled fescue (Feb. 2011)

Example System - ScheduleWinter/Summer Pasture – 250 days

• 450 lb steers ADG of 1.6 lbs.• November 20 to December 20

– 5 lbs of 67:33 soy hulls:corn gluten– 2 lbs ddgs– Stockpiled pasture

• December 20 to April 10– 4 lbs of DDGS fed every other day– Stockpiled pasture (strip grazed-2 day supply)

• April 10 to end of July– Fescue/clover pasture no supplement

Example System - ScheduleWinter/Summer Pasture

• 250 days with cattle

• 100-120 days without cattle

• Aug through Nov the farm rests and stockpiles forage for the next group

• Much less hay or hay equipment

Fed 1 lb DDGS + mineral

Owned 238 days

Sold August 8, 2013

62 Head averaged 801 lbs

Winter/Summer Pasture-450# steers @ $1.85 $832.50

-Hulls / Gluten @ $220 / ton $16.50

-DDGs @ $250 / ton $27.75

-Pasture Maint.(0.75 acre/head) $89.92

-Mineral $25.00

-Vet/med $25.00

-Interest (6%) $31.44

-Death Loss (3%) $22.95

Total Cost $1071.06

850# steer break even (BE) $126.01 / cwt.

Winter/Summer Pasture

• BE around $126 per cwt.

• August 2014 futures $165

• Price expectation low $150’s per cwt.

• At 153.00 cwt gives a $229.44/head profit

• $13,537 per load on about 50 acres

• $271/acre

Alternative SystemsCow-Calf

• Fall Calving– Better conception rates and lower mortality– Better markets (calves and cull cows)

• Spring calving - Strategic Winter Grazing – Wean in Sept - drylot cows - feed hay– Stockpile the whole farm– Start grazing in Jan through the calving

season until new spring grass

Balancing Rations – Fall 2013

• Corn vs Soy Hulls– Use soyhulls until corn is $20/ton cheaper

• DDGS vs Corn Gluten– DDGS is the better choice for 4 and 5 wt

calves, after that calculate the price

• Hay Quality and Silage Quality– Hay has been variable, silage has been very

good