Introduction

A cattle feeder should be able to answer these three questions: 1) when will the cattle "finish", 2) what is the expected cost of fed cattle by that fourth dimension, and 3) is feeding those animals likely to make money? Factors that impact cattle feeding probability include the cost of feeder cattle, the price of fed cattle, feed price, feeding costs, rate of gain, death losses and interest rate. A producer should be aware of the seasonality of prices and the sliding calibration in order to brand better marketing decisions.

When feeder cattle prices are quoted, animals are typically classed by gender and weight. The human relationship between price and weight varies seasonally and over fourth dimension. Regular or average cattle toll changes within a year are captured past the cost seasonality concept. A "price slide" is oft used to adjust for the differences betwixt the actual weight of the cattle and the base weight on which a base price is established. These two factors affect the terminal cost the seller (heir-apparent) would receive (pay) for the finished cattle. The concepts are explored in greater depth in the following sections.

Understanding Feeder Cattle Toll Spreads

Dissimilar supply and need situations result in seasonal toll patterns during the year. Seasonality is measured past an alphabetize stating average prices over a particular time (usually in a specific month) relative to annual average prices.Different classes of animals accept their distinct cost seasonality patterns. For instance, fed cattle prices tend to peak in late winter or early spring earlier moving lower into summer due to supply and demand reasons. Figure one shows the seasonal price pattern for finished steers in Alberta. The chart shows seasonality with an index of 100 representing the annual average. The March bar, for case, shows that during the eight yr period, from January 2006 to December 2013, A1 and A2 steer cost in March tends to average 3.five% higher up the annual boilerplate. The September toll tends to average ii.2% below the almanac average.

This seasonal price blueprint for fed cattle results in a adequately predictable pattern in the feeder cattle price spread. For case, in late summer, mid-weight feeders in the range of 600 to 700 pounds may have a pocket-size cost per pound disbelieve compared to feeder calves in the 500 to 600 pound weight range. If placed in a finishing feedlot at the commencement of September, a 650 pound steer would terminate in about 210 days, around the end of March when slaughter cattle prices tend to be seasonally potent. Alternatively, a 550 pound steer, if placed in a finishing feedlot at the showtime of September, would not finish until the stop of April. Perhaps afterward fed cattle prices have peaked.

Equally nosotros motion through the fall, 600 to 700 pound feeders become less desirable to buyers for ii reasons: i) If placed in a feedlot in late Nov at 650 pounds, they will not cease until mid-June, when fed cattle prices tend to exist seasonally weaker. 2) A 650-pound feeder, if "backgrounded" at a lower rate of gain, would get a 900- to 950-pound heavy feeder by spring. The 900- to 950-pound feeder at the end of April would not be as desirable for the "grasser" market. If placed in a finishing feedlot, it would be ready for slaughter about mid-Baronial, when prices tend to exist seasonally lower.

However, a 550-pound steer in late November could exist backgrounded through the winter and sent to grass in the spring. Alternatively, it could be placed into a finishing feedlot as a 800-850 pound feeder. It would so be prepare for slaughter in October, when prices are typically starting to better from their summertime lows.
Effigy 2 shows how relative prices modify during the twelvemonth for different weight classes. The chart shows an eight twelvemonth seasonal alphabetize cost comparison between 550 lb (blue bars) and 850 lb (ruby-red bars) feeder cattle for Alberta. Much of the relative price difference can be explained by a combination of:

  • when those feeders would end if placed in a feedlot, and
  • the seasonal supply and demand for the respective weight classes.

Moving from winter into leap, the supply of 550-pound calves becomes less. Meanwhile, heavier weight feeders go more plentiful as moo-cow-calf operators sell their backgrounders. Feedlots are not usually aggressively behest for those heavy weights since they volition cease at a time that fed cattle markets are seasonally weak and because there are more of them marketed at that time. Into the fall, heavy weight feeders become more desirable since they will end when fed cattle prices are seasonally stronger, while lighter weight feeders are plentiful in supply every bit a considerable amount of calves are weaned and sold in the fall.

Agreement the Sliding Scale Mechanism

Usually lighter weight feeder cattle are sold for a higher cost per pound. Figure 3 indicates the 5-year (2009-2013) average steer price for different weight classes in the month of September for Alberta. Prices for steers decrease as weight increases. In greenbacks forward contracts both the heir-apparent and seller encounter chance from weight differences at the time of commitment compared to the fourth dimension the contract was entered into. A "Price slide" is the usual approach to bargain with this type of incertitude. The sliding scale enables bids for cattle to be presented by the heir-apparent to the seller prior to actually weighing of the animals.

Figure 3: 5 year average prices for different weight classes of steer in Alberta

The numbers used in a sliding scale should be derived from the market place. Hither is an example. The cattle owner must be aware of current market prices for similar cattle to determine the fairness of a bid and the slide being offered. This means the producer must visit sale markets to discover cattle sales, spotter net or satellite sales, consider the seasonal cost tendency of various feeder cattle weight groups and seek market opinions from others in the industry.

Suppose the current average price for 650-weight steer calves is $1.27/pound, the average price for 550-weight steer calves is $ane.33/pound, and the boilerplate price for 450-weight steer calves is $1.41/pound. Now, consider a group of average quality steer calves bid on at the subcontract. The heir-apparent estimates their average weight at 550 pounds. Based on the current market place weather condition, that group of 550-weight calves should be worth about $one.33/pound. Still, since the weight of those calves is just an guess at this indicate, the buyer and seller may wish to build an adjustment gene into the offering to account for any difference between the estimated weight of 550 pounds and the actual weight of the calves to be determined later upon weighing at delivery.

Since the current market place price for 450-weight steer calves is $i.41/pound, or eight cents a pound more 550-weight steers, information technology would exist advisable to positively adjust the price of the subcontract calves past viii cents a pound for every hundred pounds that the actual weight is less than the 550-pound base weight.

On the other hand, the current price of 650-weight steer calves is $i.27/pound, or six cents a pound less than 550-weight steers, then it would be appropriate to negatively adjust the toll of the farm calves by six cents a pound for every hundred pounds that the actual weight is greater than the 550 pound base weight. If these adjustments became office of this bid, the bid would exist $1.33/pound for a base weight of 550 pounds, with a "06" upwardly and a "08" down slide.
Using this sliding scale, often chosen "zero-six upward" and "zero-eight downward", and a base price of $ane.33/pound for 550-weight steers, here is how the cost would be adjusted after the cattle are actually weighed. If the actual average weight of the cattle is 575 pounds, or 25 pounds greater than the base weight, the final price would be $i.33 - (25/100 X .06) or $ane.3150. If the actual average weight of the cattle is 530 pounds, or xx pounds less than the base of operations weight, the final price would exist $1.33 + (xx/100 X .08) or $1.3460.

The price slide can reverberate anticipated feeding efficiencies. For example, higher performing feeders may take a smaller slide adjustment than less efficient feeders.

Other important Notes:

Other factors affecting price spreads between feeder cattle weight classes are demand-related to the backgrounding,grasser, or convenance heifer market. Rise feed grain prices tend to disfavor the value of lighter feeders compared to heavier weight feeders since it costs more than for the cattle to gain weight on a higher price grain-based ration. Ampleforage supplies tend to favour the value of lightweight feeders as provender owners bid up the feeder price in an effort to plow their low-value forage into beefiness. Feeder heifer need for the breeding market normally improves when bred cows go relatively loftier-priced. Conversely, when the beef industry is in wrinkle mode (declining beef cow numbers),the need and cost for feeder heifers tends to drib relative to steers.

Summary

This article sheds some light on different relationships betwixt cost and weight of cattle. Price and weight as well as gender relationships vary in unlike ways. There is a relationship between weight and price at a specific time for any class of animal. Also, the toll of any weight class of fauna has a seasonal pattern. The time when prices tend to peak is different for dissimilar weight classes. Sometimes, at that place is a fourth dimension gap between contract and commitment of the finished cattle. A sliding scale of prices tin can be used to account for differences between estimated and bodily weights.Understanding all these trade-offs helps a producer make a better decision.

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