Building upon the earlier discussion, it might be useful for guys to update their analysis of cull cow calue as they get closer to making marketing decisions.
The same principles apply today as they did the first time I talked about this. Of course as we get closer to the fall calf run and subsequent glut of cull cows at salebarns across the land this fall, prices have dropped from earlier this summer and the thin/fleshy spread is beginning to tighten. Right now the spread is about $7.00/cwt., which is pretty good, but I expect it to tighten considerably into JAN before loosening a little in late-FEB and MAR.
So as guys think about how to add value to market culls, think about when the market will be most likely to pay for the feed they put into these culls. 60 days from weaning/preg check may not be the best spread to work with. 90 days will look a lot different.
If guys look at more of a MAR time-frame for marketing, they should back calculate rations and cost of gain to optimize value.
Example:
Our average cow at 1150# @ $52.50 yields $603.75/head.
Now let's say we take this 1150# cow and put her on feed for 60 days.
Now let's say we take this 1150# cow and put her on feed for 60 days.
She'll gain about 3 pounds/day with a cost fo gain of $0.75.
Now that we have put an extra 180 lbs. on her and she's weighing about 1330 lbs., in today's market she'll probably be valued somewhere around $59.50/cwt. So she will gross $791.35.
Using our Return on Feed Value Calculator we see that with a $0.75 cost of gain, she nets about $52.60 more than she would have if we didn't feed her.
So, if we go back to our original discussion on this topic, adding weight beyond the 180 lbs. is probably not economically feasible.
Here's why:
Once she has been fed to a fleshy appearance and she falls within the weight/value grid, any additional weight is paid for at the market place at the same price. Meaning, there is a price threshold where the market doesn't pay any additional value.
Example:
Same average cow at 1150# @ $52.50 yields $603.75/head.
Now let's say we take this cow and put her on feed for 120 days.
Now that we have put an extra 360 lbs. on her and she's weighing about 1510 lbs. she'll still be valued somewhere around $59.50/cwt.
So she will now gross $898.45/head.
Using the Return on Feed Value Calculator we see that with a $0.75 cost of gain, now she only nets about $24.70/head more than she would have if we didn't feed her.
So we lost about $27.90/head because we fed her more feed than what the market was willing to pay for.
So in effect our additional feed bill chewed up any margin made on the extra weight.
The other thing you have to watch out for is the spread between thin and fleshy. In our currrent market that is about to be flooded with culls, the spread is going to tighten considerably and probably won't begin to widen until until late-FEB or MAR.
In our example the spread was about $7.00/cwt. That is pretty typical for this time of year when supply is tight, but where we are now in the fall when supply increases, not only will the value drop but the spread will tighten. You will have to take this into consideration.
Let's look at the exact same example, but now the spread will shrink to $4.00/cwt.
Just by shrinking the spread between thin and fleshy, our additional profit over not feeding these cows shrank from $52.60/head to $12.70/head. Now feeding these cows is probably not worth the hassle.
So if you feed culls for 60 days and the spread is tight, back them off feed, put them on a maintenance ration, and wait for the spread to widen in late-FEB or MAR.
As a general rule, putting 180-220 lbs. on an average cow is probably going to most effectively optimize her value. You can adjust rate of gain with what you feed her so you have some market time flexibility built in to your system to take advantage of price point thresholds and thin/fleshy spreads.
Thank You and Have a Great Day!!
