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About Harlan Hughes

A North Dakota State University professor emeritus, Harlan Hughes writes "Market Advisor," a monthly column in BEEF magazine, and he makes presentations at many state, regional and national beef industry events. He retired as the NDSU Extension livestock economist in 2000 and now lives in Laramie, WY.

Contact Prof. Hughes at 701/238-9607 or e-mail Harlan: harlan.hughes@gte.net.

Don't market like 2008

Nov 1, 2009 12:00 PM, Harian Hughes

The marketing loss on retaining 2008 calves was calculated at $24/cwt. of initial weaning weight. Corn prices for growing and finishing 2008 calves were so high that COG for retained ownership is calculated at $72/cwt. of gain. These two numbers ensured a calculated loss for retaining 2008 calves.

With corn prices projected lower in 2009/2010, COG in retained ownership is projected at $60/cwt. with 2009 calves. My projected increased corn prices for 2010/2011 suggests COG at $66 for 2010 retained calves.

Notice that the projected buy/sell margins are shrinking slightly as years progress. I've written extensively about how the buy/sell margin must decrease in order to return a profit to the cattle-feeding sector. The projected profits from retained ownership are calculated at -$66, $40 and $40 for retaining 2008, 2009 and 2010 calves, respectively. Indeed, I am projecting profits returning to retained ownership as corn prices work lower.

Producers were forced to market their 2008 calves in a falling economy; now, they're trying to market 2009 calves in a very uncertain but slightly stronger economy. All this leads me to strongly recommend that producers not use last year's experiences to make this year's marketing decisions.

Harlan Hughes is a North Dakota State University professor emeritus. He lives in Laramie, WY. Reach him at 701/238-9607 or harlan.hughes@gte.net .

Figure 1. Suggested planning prices for marketing 2009 calves
	2009		Western Nebraska	Projected 2010 planning prices
Lbs.			Current					Oct.'10
425	$120	$116	$120	$112	$120	$117	$115	$117
500	$114	$112	$116	$108	$115	$111	$113	$112
550	-	$109	$113	-	-	-	-	$110
600	$109	$106	$110	$102	$110	$105	$108	$107
700	$104	$101	$105	$97	$105	$100	$102	$102
800	$99	$96	$100	$92	$100	$95	$98	$97
900	$94	$92	$96	$88	$95	$91	$93	$93
	$84	$87	$85	$87	$88	$89	$87	$89

Figure 2. Traditional marketing programs for 2008 calves
Marketing strategy	Buy/sell margin	Cost of gain (COG)	Profit/head
Spring calving	ND-FBM-07*
Sell at weaning	xxxxxx	$112	-$22
Background high ADG	-$18	$0.77	-$69
Finish background steers	-$5	$0.74	$3
Grow and finish	-$24	$0.72	-$66
*North Dakota Farm Business Management (2007)

Figure 3. Traditional marketing alternatives for 2009 calves (Projected 9/11/09)
Marketing strategy	Buy/sell margin	Cost of gain (COG)	Profit/head
Spring calving	ND-FBM-07*
Sell at weaning	xxxxxx	$105	$27
Background high ADG	-$17	$0.62	-$23
Finish background steers	-$7	$0.67	$27
Grow and finish	-$22	$0.60	$40
*North Dakota Farm Business Management (2007)

Figure 4. Traditional marketing alternatives for 2010 calves (Projected 9/11/09)
Marketing strategy	Buy/sell margin	Cost of gain (COG)	Profit/head
Spring calving	ND-FBM-07*
Sell at weaning	xxxxxx	$105	$27
Background high ADG	-$10	$0.66	$28
Finish background steers	-$12	$0.73	-$34
Grow and finish	-$19	$0.66	$40
*North Dakota Farm Business Management (2007)

Read more of Harlan Hughes' columns at www.beefmagazine.com

Marketing 2009 calves: Part I

In previous columns, we've discussed producers' preparation of cost-and-return projections for 2009 calves. This month, we'll develop a set of planning...

Marketing 2009 calves: Part II

These are unprecedented economic times that call for unprecedented management actions by ranchers. Previous columns have focused on the cost side of running...