Fall Beef Calf Price Outlook

Calf prices decrease as fall progresses and as more calves become ready for market.  In addition, heavier cattle bring lower prices then light cattle due to the prevailing price-weight slide.  However, calves gain weight as fall progress, which means more pounds per sale.  How does one balance these competing trends and find the best time to market your calves?  This column will revisit this important question using some weight-specific and month-specific feeder cattle price predictions.  These predictions are based upon a statistical model of Kentucky feeder steer auction prices that takes into account feed prices, current feeder cattle prices, cattle futures prices, seasonality and animal weight.


Suppose you were considering when to market a group of steer calves that could be marketed as early as mid-September around 350 pounds or held on farm under a feeding program that would allow them to gain about 2 pounds per day over the fall and early winter.  Using my price projections I chart out the value of the calf at different points throughout the fall and early winter in the table below.  I also chart out the costs of holding these animals in the feeding program, where the feeding program uses a ration involving mostly corn ($2.00/bu) and some soybean based feed ($0.11/lb.).  I assume animals begin with a feed to gain ratio of 8.00 and that this ratio increases a little bit throughout the fall as temperatures decrease and as the animals get larger.  I also incorporate an annual death loss of 2.5%, interest charges of 5% and miscellaneous costs of facility repair and maintenance.


Date        Lbs.     Pred. Price    Gross Rev.   Costs   Net Rev.   $ Gain

15-Sep   350      135.09           472.83         0.00     472.83         0.00

15-Oct    410      115.57           473.82        26.61    447.21      -25.62

15-Nov    470      102.83           483.29        53.51    429.78      -43.04

15-Dec    530      104.24           552.45        81.06    471.39       -1.43

15-Jan    590       105.62           623.18       109.16   514.02       41.19


The above projections suggest that holding these calves to heavier weights can be attractive for those willing to hold cattle into 2006.  However, holding animals that long may be difficult.  Many may not have the facilities to hold animals to these heavier weights and in potentially inclement weather.  Furthermore, rates of gain may be more variable as winter weather arrives.  Also, recall that the returns to holding cattle are critically dependent upon future price projections; like any predictive model, we should have less confidence in price projections further into the future.  Hence, there is greater price risk from holding animals for a longer period of time.  Finally, delaying sales to 2006 may mean altering your tax situation if your tax year matches the calendar year, which is the case for many farmers.

Losses are projected for holding animals into October, November or December.  Note that the return to holding animals is also dependent upon the price of corn used in the feeding program.  Many of you may have corn available to you at prices different from the $2.00/bu price built into these projections.  While everyone’s situation will be a little different, this example will hopefully provide a template for making you marketing decisions this fall.

Another key assumption driving these results is that of feed efficiency.  While some calves in your pen may require 8 pounds of feed per pound of gain, the average calf may be more efficient.  The table below considers the case with a feed/gain ratio of 6.00.


Date      Lbs.   Pred. Price    Gross Rev.     Costs    Net Rev.    $ Gain

15-Sep   350      135.09           472.83        0.00      472.83          0.00

15-Oct    410      115.57           473.82       20.98    452.85       -19.98

15-Nov    470      102.83           483.29       42.22    441.08       -31.75

15-Dec    530      104.24           552.45       64.09    488.37        15.54

15-Jan     590      105.62           623.18       86.49    536.70        63.87


As the table shows, if feed efficiency is better, holding animals on a back grounding program in more attractive.  Hence, knowing your calves’ ability to convert feed efficiently into pounds of gain is crucial for helping understanding the relative profitability of various marketing strategies.  To help in your decision making, several versions of the above tables, for various corn prices, feed efficiencies and initial weights are available on my website along with price projections for several feeder steer weight classes.  Just click on the fall calf outlook slides link at: http://aede.osu.edu/people/roe.30/livehome.htm.

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