Cow/Calf producers who retain cattle over the winter should recalculate the value of gain for cattle in the spring to determine if the market still is willing to pay them to put on additional weight, said Elliott Dennis, extension livestock economist at the University of Nebraska, Lincoln, in a Livestock Marketing Information Center letter called In The Cattle Markets.
Cumulative national feeder and stocker cattle receipts are slightly lagging 2021 and the 2017-2021 average at 12,098,700 head through Oct. 21, Dennis said. In 2022, more of the receipts are coming from cattle weighing less than 600 pounds and heifers – both signals that the drought is affecting feeder and stocker cattle being sold.
DECISION TIME
Producers who still have calves are in the process of deciding whether to sell or retain weaned calves, he said. This decision must consider the cost to put on the additional weight and the expected price received when cattle are sold at higher weights (at current and future basis-adjusted prices).
The difference between the two is profit but only on the additional weight gained, Dennis said. Current positive values indicate profits could be made by retaining feeder cattle this fall.
University of Nebraska surveys show producers can use a combination of price risk management and different lengths in their production system as a hedge against adverse price movements, he said.
Putting on weight during the winter and selling in March or April or selling in the late summer are the two common backgrounding production systems in Nebraska, Dennis said. Within these two systems, weight gain can be influenced by the type of feed given.
FAST VS SLOW GAINS
Gain can either be fast or slow in either the winter stocking 2022-23 and summer grazing 2023 seasons, Dennis said. These decisions affect the total weight gained at each phase and thus the time and weight feeder cattle enter feedlots.
As an example, Dennis calculated the value of gain on the slow and fast wintering scenarios using 66 head of 525-pound weaned steers bought on Nov. 2 and sold in Lexington, Neb., on March 9, 2023, using Beef Basis. The value of gain for the slow winter performance using an average daily gain of 0.80 pound per day was $198.96 per cwt.
The value of gain for the fast winter performance using an ADG of 2.05 pounds per day was $137.45 per cwt, he said. Within each of the production systems, there was little advantage to speeding up or slowing down the cattle since the value of gain does not vary substantially between the two weeks before or after the proposed sell date.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $152.98 to $153.43 per cwt, compared with last week’s range of $150.11 to $153.77. FOB dressed steers, and heifers went for $237.32 to $237.55 per cwt, versus $234.01 to $242.86.
The USDA choice cutout Tuesday was down $0.96 per cwt at $257.98 while select was off $2.06 at $233.21. The choice/select spread widened to $24.77 from $23.68 with 89 loads of fabricated product and 50 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were steady to down $0.10 at $2.05 to $2.25 a bushel over the Dec futures and for southwest Kansas were steady at $1.00 over Dec, which settled at $6.57 1/4, down 3/4.
The CME Feeder Cattle Index for the seven days ended Friday was $175.23 per cwt down $0.23. This compares with Monday’s Nov contract settlement of $176.95, unchanged.