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In the Cattle Markets

Next options for the fall calf crop.

In the midst of marketing this year’s fall calf crop, it is useful to step back and note marketing prospects and options available to buyers and sellers of calves. For context note the current projected price of selling a 550-pound (lb.) calf in Salina, Kan., on Oct. 19 is $137.28 per hundredweight (cwt.). The main marketing alternatives available include selling at weaning, preconditioning, backgrounding, drylot wintering and winter grazing.

To provide further context on current market signals, the value of gain (VOG) projections provided by are provided in Table 1.1 These estimates were derived for the Salina, Kan., market and include an adjustment of $3.18 per cwt. to reflect pending adjustments in the CME Feeder Cattle settlement index.2

Table 1: Value of Gain Projections

  DOF Sales date Sales weight ADG Sales price VOG ($/hd) VOG (/cwt.)
Preconditioning 35 11/23/2016 600 1.43 $127.30 $8.76 $17.52
Background 100 1/27/2017 800 2.50 $114.22 $158.72 $63.49
Drylot 175 4/12/2017 725 1.00 $120.24 $116.70 $66.49
Preconditioning + wintergrazing 165 4/2/2017 850 1.82 $110.01 $180.05 $60.02

Note: Projections made for Salina, Kan. market using An adjustment of $3.18/cwt. (2011-2015 average) was used for projected sales prices to reflect pending changes in CME Feeder Cattle settlement index.

The projected VOG for preconditioning at first glance appears very poor at $17.52 per cwt. ($8.76 per head). However, it is important to note this projection presumes no premium at marketing. Recent research suggests that an average premium of $3.27 per cwt. may apply when vaccination and weaning claims are both made at marketing.3 If a producer proactively marketed their preconditioned calves achieving this premium then the projected VOG increases to $56.76 per cwt. ($28.38 per head).

Prospects for longer ownership efforts of backgrounding, drylot wintering or combining a preconditioning and winter grazing program currently have VOG projections of $60-$66 per cwt. When one couples these projections with the current wheat (and broader grain complex) market situation, it seems probable that a higher share of cattlemen will seriously consider engaging in winter graze out (rather than just winter grazing). Producers planning to graze out wheat are encouraged to repeat this exercise and derive updated VOG projections after placement as critical dates approach for when cattle would have to be removed to retain a marketable grain crop.

It likely goes without saying at this point, but any effort at delaying cattle sales or purchasing cattle for later sale at heavier weights exposes an operation to both down- and up-side price risk. Many cow-calf producers are understandably disappointed with their current calf price prospects, which may lead them to retain ownership longer than originally planned. Only time will tell if that strategy proves profitable. In the meantime, all producers are encouraged to conduct analyses such as the one shown here to compare market-based VOG projections with their own production costs to guide more-informed decisions.

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Editor’s Note: Glynn Tonsor is a professor of agricultural economics at Kansas State University.


2A map showing alternative market locations in the database is available here: Producers are encouraged to identify and utilize information for the market closest to their operation.


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