The cash market is heating up with the fall run of calves starting to filter into the marketplace. Although the cash market has remained pretty strong, especially on the lightweights, the fall calf run is putting a lot of pressure on the futures market. this is going to create some opportunities for guys that want to add some weight to these calves before they go to town. However, the key thing in this market will be to look at how much feed is the market willing to pay for?
We had a discussion earlier this summer about the disparity between feed value and market value of that feed converted to liveweight. I think that discussion needs to be monitored in this market right now. Let's look at some examples of backgrounding scenarios in this market:
Wean 474# steers; today's value $130.51 = gross return of $618.61/head
$618.61/head - $500 cost per calf = net return of $118.61/head
Now let's feed those steers for 90 days, 2.5#/day of gain @ $0.65/lb of gain
We'll protect them on the JAN 11 @ $112.10
Sale weight 699#
Breakeven $92.80/head
Profit $134.88/head less basis and commissions
Difference between selling off the cow and backgrounding $16.27/head
On these lighter steers, we gained a little by hanging on to them and feeding them.
Now let's back that ration off a bit and look at lower performance and cost of gain
Feed those steers for 90 days, 1.5#/day of gain @ $0.35/lb of gain
We'll protect them on the JAN 11 @ $112.10
Sale weight 609#
Breakeven $90.26/head
Profit $132.99/head less basis and commissions
Difference between selling off the cow and backgrounding $14.38/head
Difference between backgrounding on higher performance and lower performance rations $1.89/head
So we didn't gain a heck of a lot on these lighter steers by adjusting performance and cost of gain
Now let's look at some heavier steers
Wean 575# steers; today's value $126.24 = gross return of $725.88/head
$725.88/head - $500 cost per calf = net return of $225.88/head
Now let's feed those steers for 90 days, 2.5#/day of gain @ $0.65/lb of gain
We'll protect them on the JAN 11 @ $112.10
Sale weight 800#
Breakeven $80.81/head
Profit $250.30/head less basis and commissions
Difference between selling off the cow and backgrounding $24.42/head
On these heavier steers, we gained almost $25/head by hanging on to them and feeding them.
Now let's back that ration off a bit and look at lower performance and cost of gain
Feed those steers for 90 days, 1.5#/day of gain @ $0.35/lb of gain
We'll protect them on the JAN 11 @ $112.10
Sale weight 710#
Breakeven $77.11/head
Profit $248.41/head less basis and commissions
Difference between selling off the cow and backgrounding $22.53/head
Difference between backgrounding on higher performance and lower performance rations $1.89/head
So you can see that right now the market is paying for the feed either way for steers however, the game gets a little more interesting when you look at heifers.
Wean 479# heifers; today's value $115.95 = gross return of $555.40/head
$555.40/head - $500 cost per calf = net return of $55.40/head
Now let's feed those heifers for 90 days, 2.5#/day of gain @ $0.65/lb of gain
We'll protect them on the JAN 11 @ $112.10
Sale weight 789#
Breakeven $92.21/head
Profit $139.98/head less basis and commissions
Difference between selling off the cow and backgrounding $84.58/head
On these lighter heifers, we gained quite a bit by hanging on to them and feeding them. Partially because of feed value and partially because of the price slide we gained by protecting them on the board.
There isn't much difference in net profit right now by feeding them to lower performance and cost of gain. Either way will net about the same.
Let's look at some heavier heifers:
Wean 567# heifers; today's value $112.54 = gross return of $638.10/head
$638.10/head - $500 cost per calf = net return of $138.10/head
Now let's feed those heifers for 90 days, 2.5#/day of gain @ $0.65/lb of gain
We'll protect them on the JAN 11 @ $112.10
Sale weight 792#
Breakeven $82.18/head
Profit $236.95/head less basis and commissions
Difference between selling off the cow and backgrounding $98.85/head
This is why I think there will be some good opportunities for backgrounders this fall, especially in the heifers. These of course are just examples and values are going to change over time, but most folks are still a month or so out from weaning calves so there is some time to watch what the markets are doing and respond accordingly.
Thank You and Have a Great Day!!
