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The Cattle Business -- Fall Yearling Marketing

Livestock Update, July 1998

Bill McKinnon, Animal and Poultry Sciences, Virginia Tech

It is time to begin planning the marketing of yearlings off of grass. With relatively high priced calves last fall and grass cattle this spring, effective marketing will be essential to squeeze out some profit from most stocker cattle operations.

The question constantly arises as to the timing of the sale of the cattle. History has demonstrated that on the average, yearling cattle prices drop from late summer into the fall. Examining Virginia prices for 800 to 899 pound steers from the last three years (1995-1997), show prices dropping roughly a dollar per hundredweight from July to the August-September period. Prices then typically fall roughly another $2 during the month of October. Price then level off or rebound $.50/cwt. into November. The predictable October slump in prices results from a number of issues. The basic problem is that the marketing and transportation infrastructure simply becomes overloaded. The graph below illustrates this trend for 8-weight steers. The basic trend is similar for other classes of yearling cattle.

Graph 1.

The question arises as to whether selling cattle early to avoid typical market drops forgoes the opportunity to add more gain and ultimately, value on the cattle. The answer to the question is not always easy and certainly depends upon several issues. The extent of the seasonal market drop, the price differential as the weight of the cattle increases, the current market level, the expected increase in weight, and the costs of keeping the cattle longer.

Below is a comparison of selling a set of 850 pound steers in mid-September versus holding the cattle another 30 days, into October. For purposes of the example, it will be assumed that the steers will put on an additional 50 pounds (roughly 1.5 lb./day gain) during the 30 days. Given past history, prices can be expected to drop roughly $2.00/cwt. holding cattle into October. The increase in weight should also result in a price per hundredweight reduction of $1.50. The right hand column examines the scenario if the decision to hold or sell comes a month earlier in August.

Sale date:Sep. 15Aug. 15
Sale weight850 lb.850 lb.
Sale price$72.00/cwt.$72.00/cwt.
Sale price/head$612.00$612.00
Alternative sale date: Oct. 15Sep. 15
Sale weight900 lb.900 lb.
Sale price$68.50/cwt. $70.50/cwt.
Sale price/head$616.50$634.50
Added costs:
    10% interest 30 days$5.03$5.03
    Pasture & minerals$5.00$5.00
Net from holding 30 days($5.53)$12.47

The decision to hold or sell will always be an individual situation, dependent upon a number of factors. If the grazing is short or played out and/or the cattle are already carrying excellent condition, the amount of added gain from holding may be disappointing. The hold/sell decision should be a reasoned process and not done out of fear.

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