Given the marketing events of the last nine months, marketing your 2001 calves during the current turn-around phase of the cattle cycle has to be the ultimate challenge. My studies suggest that ranchers should seriously consider a different marketing strategy for the expansion, contraction and turn-around phases of the cattle cycle.
Based on my producer contacts of last fall, many Northern Plains 2001 calves were kept back and backgrounded. My analysis shows that if these calves were backgrounded hard (fast-track backgrounding) and marketed at 800 lbs. in January 2002, a small profit beyond that of selling them at weaning was possible.
The feeders who bought these fast-track calves fared worse. Most of them were to be harvested in June 2002. Price projections (as of late May) for June cattle harvest were in the low $60s.
June typically is a period of seasonal price lows, but no one projected prices in the low $60s. I project losses of $96/head for finishing these fast-track backgrounded calves.
When I wrote my June issue column at the end of April, the April 2002 price downturn had just occurred. By May 10, June futures turned upward but weakened by the week of May 23. These weaker prices are reflected in the profit forecasts in this Market Advisor.
Five Short-Run Strategies
My evaluation of six traditional, short-run marketing strategies for 2001 calves is shown in Figure 1. The strategies are:
sell at weaning,
fast-track backgrounding and sell in January,
finish the fast-track, backgrounded calf in another lot,
grow and finish in the same lot,
run grass steers in summer 2002,
finish 2002 steers off grass.
The highest accumulated profit for Northern Plains ranchers is projected selling fast-track backgrounded 2001 feeders right after the first of the year. The lowest profit is projected for the rancher who backgrounds his 2001 calves in one lot and finishes them in another with a target harvest date of mid-June 2002.
I project a loss for running grass steers in summer 2002 and a $25/head profit for the cattle feeder who finishes these 2002 grass steers. Delaying the harvest of 2001 calves can potentially increase the economic returns.
This further suggests that ranchers running grass yearlings this summer should consider retaining and feeding out their grass cattle. Stay flexible; see what price forecasts are at grazing season's end. There's some light ahead.
Less Traditional Strategies
Would ranchers be better off marketing their 2001 calves under a less traditional strategy like split marketing or summer calving?
In split-marketing, a rancher divides his calves into heavyweight, middleweight and lightweight groups, then uses a different strategy for each group.
I prepared an economic analysis in which heavyweight 2001 calves were weaned and sent directly to a growing and finishing lot. The middleweights were backgrounded, then sold right after the first of the year. And lightweight calves were wintered, then run on grass during summer 2002.
The only weight group projected to add value beyond the value available by selling at weaning is the middleweight group. Heavyweight and lightweight groups would lose money. (Figure 2).
The projected total herd outcome from this split-marketing strategy generates 30% less total herd net income compared to selling all calves at weaning 2001. As of late May 2002, this split marketing strategy does not look to be a good strategy for marketing 2001 calves.
Summer calving strategy. A Nebraska study suggests that May/June calving on grass can reduce production costs, mostly via savings on winter feed. The researchers recommend that calves be weaned and marketed in January or February rather than the more traditional October-November period.
Other advantages of summer calving are higher calf prices with very little weight loss when compared to conventional spring calving and selling at weaning. My analysis suggests summer calving is the most profitable strategy for producing and marketing 2001 calves.
If these summer-born calves were kept past weaning (mid-January 2002), wintered, and then run on grass in summer 2002, I project a substantial reduction in total herd profits compared to selling at weaning. Summer calving in 2001 and selling at January weaning was the best marketing strategy.
Harlan Hughes is a North Dakota State University professor emeritus. He lives in Laramie, WY. Reach him at 701/238-9607 or firstname.lastname@example.org.
|1.||Sell at weaning||N/A||$0.70||$113|
|2.||Bckg high ADG||-$14||$0.45||$7|
|3.||Fin bckg steer||-$16||$0.48||-$71|
|4.||Grow and finish||-$30||$0.40||-$20|
|5.||Steers on grass||-$12||$0.45||-$19|
|6.||Fin grass steer||-$9||$0.47||$20|
|The six marketing alternatives evaluated here are: 1) selling 565-lb. calves at weaning, 2) backgrounding 565-800 lbs. sold after first of the year, 3) finishing backgrounded steers 800-1,200 lbs., 4) growing and finishing 565-1,175 lbs., 5) steers on grass 625-800 lbs., and 6) finishing grass steers 800-1,250 lbs. |
*Projected week of May 29, 2002
|1.||Sell at weaning||N/A||$0.70||$100|
|6.||Fin grass steer||-$13||$0.61||-$68|
|1.||Sell at weaning||N/A||$0.71||$142|
|*Projected week of May 29, 2002|