Marketing this year’s calf crop may be the most challenging decision cow-calf producers have faced. The simplified summary of advice is to look at the costs, read the markets, understand and use the Canadian Agricultural Income Stabilization program and evaluate priorities.
“The first step in a normal year is to look at the cost of keeping the cow for the last year and establish the break-even price for weaned calves,” said Trevor Yurchak, beef specialist with Alberta Agriculture in Athabasca.
“Across the province, production costs per cow over the past year, based on previous years’ data, have ranged from $500-$650 per cow wintered. When a 90 percent weaning rate is included, the cost per calf weaned ranges from $550-$720. Based on an average weaning weight of 550 pounds, across heifers and steers, the break-even sale price for weaned calves would be $1-$1.30 per lb.”
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Yurchak said this year is not normal so other decision processes may apply. He said the numbers he used are only averages and producers should calculate their own costs.
The second step when marketing calves is to look at the markets and decide if the price for calves will give you a profit or loss. Markets during early August valued 550 lb. steers at 97 cents per lb. and heifers at 91 cents per lb., suggesting that profit would not be possible.
Producers should talk to local buyers, sellers and market experts to help form an opinion where markets could be in the next 30, 90 and 180 days. Today’s loss would be $50-$200 per cow wintered, depending on the costs within an individual operation.
“As market forces change weekly, market evaluation should begin now and continue until weaning,” Yurchak said. “While marketing guides can help, they should not take the place of individual market analysis.”
The third step is to evaluate retained ownership. Determine the cost of feeding calves. Using $25 a tonne for a silage price, and $2 a bushel for barley, and yardage at 35 cents per head per day, backgrounding calves to 850 lb. will cost, on average, 75 cents per lb. gained.
This suggests that adding 300 lb. to your calves will add $225. If we use $500 as a value per head at weaning, the break-even point on an 850 lb. steer will be 85 cents a lb.
“Rather than backgrounding at a lower rate of gain, producers may choose to finish cattle on a more aggressive program,” Yurchak said. “Using the same feed prices, supplement at $250 a tonne, and yardage at 30 cents a head a day, cost of finishing will average about 57 cents per lb. of gain. The cost of adding the 750 lb. needed for finishing will be $425, resulting a break-even sale price on fats of around 71 cents per lb.
“Once again, these numbers are for illustrative purposes only. Producers must calculate their own costs, and contact their own feedlots for current costs and prices.”
Yurchak said once the numbers for backgrounding and finishing are determined, producers can then do some market forecasting using local experts and market forces to determine where to make a profit.
“Remember that there is a very distinct difference between forecasting, hedging and speculating. Each one requires very specific cash flows and risk taking ability.”
The next step, which may be the most important one this year, is to evaluate the contribution the CAIS has on your operation.
“The three previous steps may show a somewhat limited profit potential, but the CAIS program has great potential to make up this shortfall.”
Many producers filed their CAIS forms early, including the equity loss interim payment, and now are receiving encouraging payments in the mail. Many producers say that CAIS interim equity loss payments will make up the shortfall they anticipate on their calves and save the farm this year.
Step five involves looking at the intrinsic values of an operation. These factors are unique to every operation and can include debt amounts, types, payment dates and interest, creditor attitudes and willingness to back your decision. Feeding programs, feed and facilities and options for each operation must be considered.
As well, family issues are important. Stress is running high for most of the industry, so the entire family or farm unit must be behind the decisions.
“These intrinsic factors can be more important than the economic factors,” Yurchak said. “Operation managers need to sit down and decide on a management plan, update it as needed, and follow the plan. The plan may be to follow the course to maximum profit or to follow a plan that will result in the least economic loss and healthiest well-being.”
