understanding the link between genetics management marketing and prices ECON 337 Agricultural Marketing 210 400 March 11 2014 Lee Schulz 5152943356 lschulziastateedu Department of Economics ID: 259278
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Slide1
Factors Affecting Feeder Cattle Prices
(understanding the link between genetics, management, marketing, and prices)
ECON 337 Agricultural Marketing: 2:10 – 4:00; March 11, 2014
Lee Schulz – 515.294.3356 –
lschulz@iastate.edu
Department of Economics
Iowa State UniversitySlide2
Buy low – sell high m
ake lots of money!
As a seller, know what your buyers are looking for and strive to deliver it to them
As a buyer, recognize how the various traits and characteristics are valued and buy what best fits your program (i.e., your comparative advantage)
What exactly does “
right” mean?
(of course this doesn’t work for everybody as some are buying from those selling)
Marketability: Buy and sell them “right”…Slide3
What drives/determines feeder cattle prices…Slide4
BASE
Some things have changed over time…
Other things have been more constant…
Breed impacts price…Slide5
Source: Holton Livestock Exchange, Inc. (Northeast Kansas)
-- Discount on heifers (vs. steers) fairly constant across sales ($5.50-$8.93)
-- Black/BWF consistently brought higher prices than other breeds/colors
Sex and breed impacts price…Slide6
Source: CAB “Where’s the Premium” study, 1999-2008
-- Target 500 pound calves in the fall and 700 pound feeders in the spring
-- Consistent premium on Angus-influence calves and premium has generally been trending up over this time period
Breed impacts price…Slide7
Source: Holton Livestock Exchange, Inc. (Northeast Kansas)
Weight impacts price…Slide8
Weight impacts price…Slide9
“Low” CN: FC price ↓ more rapidly as weight ↑
Lightweight feeders worth
more relative toheavy feeders because COG
lower
Corn price impacts weight price relationship…Slide10
“Low” LC: FC price ↓ less rapidly as weight ↑
Lightweight feeders worth less
relative toheavy feeders
Live cattle price impacts weight-price relationship…Slide11
Source: CAB “Where’s the Premium” study, 1999-2008
Lotsize
impacts price…Slide12
Feeder Cattle Trait
2001
2002
2003
Frame
Large Frame
0.174
-1.674
-3.524
Medium Frame
Base
Base
Base
Small Frame
-13.642
N/A
3.154
Muscling
Heavy Muscled
1.986
2.035
-2.475
Moderately Muscled
Base
Base
Base
Thin Muscled
-11.391
-7.224
N/A
Condition
Thin Flesh
2.731
-2.419
3.754
Average Flesh
Base
Base
Base
Fat Flesh
-3.024
-3.327
1.025
Health
Healthy
Base
Base
Base
Not Healthy
-5.789
-12.115
-7.82
Uniformity
Uniform Lot
Base
Base
Base
Uneven Lot
-1.948
-3.154
-3.174
Source: Oklahoma Quality Beef Network (OQBN) auction sales, AGEC 602
Several other factors impact price…Slide13
Factors impacting price change over time…Slide14
So does it pay to precondition calves?
Source: Factors Influencing the Price of Value-Added Calves at Superior Livestock Auctions (Lance Zimmerman MS thesis, 2010 - KSU.Premiums of +$6/
cwt when calves are vaccinated and
weaned
Premiums tend to be higher for steers than heifers
What about preconditioning calves…Slide15
Will premium disappear as Age & Source Verification becomes more common?
Premium of around $1.50-$2.00/cwt pretty consistently over last several years
Source: Factors Influencing the Price of Value-Added Calves at Superior Livestock Auctions (Lance Zimmerman MS thesis, 2010 - KSU.
What about age and source verification programs…Slide16
Feeder Cattle Reports&
USDA Feeder Cattle GradesFrame Size and Thickness (Muscling) Slide17
USDA/MRP/AMS
USDA Feeder Cattle Grades
Frame Size
Large
Medium
SmallSlide18Slide19
USDA/MRP/AMS
USDA Feeder Cattle Grades
Frame Size - Large
Tall and long bodied
½ inch fat
Steers over 1250 lbs.Heifers over 1150 lbs.Slide20
USDA/MRP/AMS
USDA Feeder Cattle Grades
Frame Size - Medium
Slightly tall
Slightly long bodied
½ inch fat Steers 1100 to 1250 lbs.
Heifers 1000 to 1150 lbs.Slide21
USDA/MRP/AMS
USDA Feeder Cattle Grades
Frame Size - Small
Not as tall as Medium
Short bodied
½ inch fat Steers less than 1100 lbs.
Heifers less than 1000 lbs.Slide22Slide23
Lot size and uniformity are very important
Breed/color impact price
Time of sale important
(probably hard to manage)
Dehorn and castrate early
Market healthy cattleStay away from extremes (frame, condition, fill)Results written up in paperon
www.agmanager.info (and (embedded in decision tool)What do premiums/discounts indicate…Slide24
http://www.agmanager.info/livestock/marketing/bulletins_2/marketing/default.aspSlide25
These three buttons take the user to tabs showing hedonic model results (i.e., tables we have already looked at).
These four buttons are linked to tabs that allow the user to examine how changing cattle traits impacts price. Partial budget tab also allows user to bring in costs in a simplified way.Slide26Slide27Slide28Slide29
Tab that allows three side-by-side comparisonsSlide30
Impact that horns have on price…Slide31
Impact that sorting cattle into smaller (-) more uniform (+) groups has on price…Slide32
Partial budget to look at net returns of making a change that affects price… Slide33
Impact that a 45-day preconditioning has on price/returns…Slide34
Partial budget to look at net returns of making a change that affects price…
$27.54Slide35Slide36
Feeder cattle price forecasts…Slide37Slide38
Beginning Date
Ending
Date
Beginning Weight,
lbs
Ending Weight, lbs
Weight Gain, lbs/headADG, lbs
Value of Gain, $/
cwt
01/11/14
02/24/14
550
650
100
2.27
$126.11
01/11/14
03/09/14
550
650
100
1.75
$130.73
01/11/14
04/09/14
550
750
200
2.27
$121.05
01/11/14
05/05/14
550
750
200
1.75
$127.38
01/11/14
05/11/14
550
850
300
2.50
$117.40
01/11/14
06/10/14
550
850
300
2.00
$120.81
Note: Projections derived for the
Dunlap,
IA market using
BeefBasis.com
Related
information available at
BeefBasis.com
01/11/14
Value of gain projections…Slide39
Historical Value of Gain…Slide40
For more information related to livestock marketing and risk management tools see…
www.extension.iastate.edu/agdm/
www.econ.iastate.edu/margins/
Lee Schulz – 515.294.3356 –
lschulz@iastate.edu
Department of Economics
Iowa State University