The Cattle Business
Livestock Update, April 1999
Bill McKinnon, Extension Animal Scientist, Marketing, Animal and Poultry Sciences, Virginia Tech
The most important time in determining the ultimate relative value of a set of feeder calves happens when the bulls are turned in with the cows. The genetic package formed by selecting growthy bulls with appropriate muscle and frame size to match the cow herd is critical to producing a heavy set of calves with marketability.
Results from last fall's graded feeder cattle sales shown in the table below illustrate that heavy calves are worth more to the producer. Sometimes producers despair because the price per pound generally declines for each hundred pounds increase in weight. As long as the cost of putting on a pound of gain is less than the final sale price per pound of the steer or heifer, the price per pound will decline as the weight increases.
|Fall 1998 Virginia Graded Feeder|
Cattle Sales Results
Certainly the overall quality of the feeder calf has some impact upon price also. In graded sales, the feeder cattle grade applied by the VDACS graders denotes the degree of muscling and relative frame size apparent in the feeder. Price differentials paid for the various grades should send a strong signal to producers as to the importance of improving quality. The following table demonstrates average weighted prices paid last fall for 5 weight feeder cattle sorted into the various grades. As with most discounts, the price per pound discount for grade diminishes as the cattle become heavier. At some sales, the L1 and M1 cattle are grouped together while at other sales the cattle are sold separately. There is always the balancing of the concern of increasing pen size to improve price versus separating the cattle to make more uniform lots of cattle.
|Fall 1998 Virginia Graded Feeder Cattle Sales|
Feeder Cattle Grades
The two tables above reflect typical price relationships in the fall sales. There is a whole new set of rules or maybe no rules at all in the spring sales. As stocker cattle operators become infected with "grass fever" and the virulence increases toward early April, the market can see some unusual price relationship develop.
Probably the most predictable price differential that changes from fall to spring is the discount for LM2's versus LM1's on lightweight cattle suitable for grass. Many calves that are wintered in Virginia and sold in the spring have been on marginal rations at best. Most have lost the condition they were carrying at weaning and some cattle in late March and early April are pretty much four legs and a digestive tract. Stocker cattle operators buying calves in the spring are counting on there being more cheap compensatory gain in the LM2's than the typically fleshier LM1 cattle. In many sales this spring, pens of 4-weight and 5-weight LM2's will bring as much or more than their L1 and M1 counterparts. The risk in paying too much for the "2's" is that too many of those cattle may be genetic "2's" instead of nutritional LM2 cattle.
When the bulls go in this spring, cow/calf operators need to remember the focus should be lots of heavy calves sold next fall that consistently fall in either the M1 or L1 pens.