Presentation on theme: "Factors Affecting Feeder Cattle Prices (understanding the link between genetics, management, marketing, and prices) ECON 337 Agricultural Marketing: 2:10."— Presentation transcript:
Factors Affecting Feeder Cattle Prices (understanding the link between genetics, management, marketing, and prices) ECON 337 Agricultural Marketing: 2:10 – 4:00; March 11, 2014 Lee Schulz – – Department of Economics Iowa State University
Buy low – sell high make lots of money! As a seller, know what your buyers are looking for and strive to deliver it to them As a buyer, recognize how the various traits and characteristics are valued and buy what best fits your program (i.e., your comparative advantage) What exactly does right mean? (of course this doesnt work for everybody as some are buying from those selling) Marketability: Buy and sell them right…
What drives/determines feeder cattle prices…
BASE Some things have changed over time… Other things have been more constant… Breed impacts price…
Source: Holton Livestock Exchange, Inc. (Northeast Kansas) -- Discount on heifers (vs. steers) fairly constant across sales ($5.50-$8.93) -- Black/BWF consistently brought higher prices than other breeds/colors Sex and breed impacts price…
Source: CAB Wheres the Premium study, Target 500 pound calves in the fall and 700 pound feeders in the spring -- Consistent premium on Angus-influence calves and premium has generally been trending up over this time period Breed impacts price…
Low CN: FC price more rapidly as weight Lightweight feeders worth more relative to heavy feeders because COG lower Corn price impacts weight price relationship…
Low LC: FC price less rapidly as weight Lightweight feeders worth less relative to heavy feeders Live cattle price impacts weight-price relationship…
Source: CAB Wheres the Premium study, Lotsize impacts price…
Feeder Cattle Trait Frame Large Frame Medium FrameBase Small Frame N/A3.154 Muscling Heavy Muscled Moderately MuscledBase Thin Muscled N/A Condition Thin Flesh Average FleshBase Fat Flesh Health HealthyBase Not Healthy Uniformity Uniform LotBase Uneven Lot Source: Oklahoma Quality Beef Network (OQBN) auction sales, AGEC 602 Several other factors impact price…
Factors impacting price change over time…
So does it pay to precondition calves? Source: Factors Influencing the Price of Value-Added Calves at Superior Livestock Auctions (Lance Zimmerman MS thesis, KSU. Premiums of +$6/cwt when calves are vaccinated and weaned Premiums tend to be higher for steers than heifers What about preconditioning calves…
Will premium disappear as Age & Source Verification becomes more common? Premium of around $1.50-$2.00/cwt pretty consistently over last several years Source: Factors Influencing the Price of Value-Added Calves at Superior Livestock Auctions (Lance Zimmerman MS thesis, KSU. What about age and source verification programs…
USDA/MRP/AMS USDA Feeder Cattle Grades Frame Size LargeMedium Small
USDA/MRP/AMS USDA Feeder Cattle Grades Frame Size - Large Tall and long bodied ½ inch fat Steers over 1250 lbs. Heifers over 1150 lbs.
USDA/MRP/AMS USDA Feeder Cattle Grades Frame Size - Medium Slightly tall Slightly long bodied ½ inch fat Steers 1100 to 1250 lbs. Heifers 1000 to 1150 lbs.
USDA/MRP/AMS USDA Feeder Cattle Grades Frame Size - Small Not as tall as Medium Short bodied ½ inch fat Steers less than 1100 lbs. Heifers less than 1000 lbs.
Lot size and uniformity are very important Breed/color impact price Time of sale important (probably hard to manage) Dehorn and castrate early Market healthy cattle Stay away from extremes (frame, condition, fill) Results written up in paper on (and (embedded in decision tool)www.agmanager.info What do premiums/discounts indicate…
These three buttons take the user to tabs showing hedonic model results (i.e., tables we have already looked at). These four buttons are linked to tabs that allow the user to examine how changing cattle traits impacts price. Partial budget tab also allows user to bring in costs in a simplified way.
Tab that allows three side-by-side comparisons
Impact that horns have on price…
Impact that sorting cattle into smaller (-) more uniform (+) groups has on price…
Partial budget to look at net returns of making a change that affects price…
Impact that a 45-day preconditioning has on price/returns…
Partial budget to look at net returns of making a change that affects price… $27.54
Feeder cattle price forecasts…
Beginning Date Ending Date Beginning Weight, lbs Ending Weight, lbs Weight Gain, lbs/headADG, lbs Value of Gain, $/cwt 01/11/1402/24/ $ /11/1403/09/ $ /11/1404/09/ $ /11/1405/05/ $ /11/1405/11/ $ /11/1406/10/ $ Note: Projections derived for the Dunlap, IA market using BeefBasis.com Related information available at BeefBasis.com 01/11/14 Value of gain projections…
Historical Value of Gain…
For more information related to livestock marketing and risk management tools see… Lee Schulz – – Department of Economics Iowa State University