Calf price differences
June 30, 2008
Most of you ranchers are probably not thinking too much about selling your calves right now. In fact, as you get irrigation water going, fences repaired, cattle moved to summer pastures and junior’s steer broke to lead for the county fair, you may not have had time to look at any market reports lately. But, as we move into the dog days of summer, I know you will be checking video auction sales, talking to order buyers, talking to neighbors and looking at sales from your local auction to try and determine what your calves are going to bring this fall. That can all be a frustrating process as the range in reported sale prices can be quite large (maybe even to exceed the coffee shop extreme prices you have heard).
You all recognize that the price levels go up and down over time as market conditions change and often you can’t do much about that. But, what about the $10 per cwt. price range on 500-550 pound steers on the same sale day? Is there anything you can do to ensure that you will be at the top end of that price range?
A recently completed study at Utah State University used three years of Superior Livestock Auction sales data to determine which cattle and lot characteristics buyers were rewarding with higher prices and which of those traits were being penalized with lower market prices. Just looking at calf prices for fall weaned calves, they found that heifers were discounted just under $9 per cwt. from steers and they found that heavier calves received a lower price per pound than lighter calves (the well known weight price slide).
They also found that Angus – black or red – calves received the highest price and that Charolais-Angus cross calves were about $1 per cwt. less. Angus-other English breed cross calves were priced on average about $2 per cwt. less than Angus and calves with Brahma or “ear” influence were priced $5 per cwt. lower than Angus. They also found that small frame calves were priced $10 per cwt. lower than medium-large frame calves. There probably are not any management decisions you can make between now and fall that will alter any of those characteristics in your cattle.
However, there are some things you can do to increase your sale value. Calves with horns were discounted a little more than $1.50 per cwt. So, it would pay you to dehorn any calves with horns. The greater the weight variation within a sale lot, the lower the market price. It might therefore pay you to sort cattle into more uniform sale lots. However, there is also a premium for larger lots, 300 head or more receiving the highest price. Lots of less than a semi-trailer load are discounted sharply. The message here is to have uniform, truck load lots to receive the highest price.
An interesting finding in the data was how prices responded to “pencil” shrink. The pencil shrink offered varied between 0-3 percent. Calves that were offered with greater pencil shrink did bring a higher price per pound. However, that higher price did not fully offset the revenue that was lost by selling less weight. The moral of this story might be that if you want coffee shop bragging rights for topping the sale, offer more pencil shrink, but if you want more dollars in your bank account, offer less pencil shrink or perhaps none.
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The Utah State University study also looked at how prices in different regions of the country compare. Prices were adjusted for transportation and for the cattle and lot characteristics mentioned above. The theory being that prices should then be the same for the same quality calf shipped an equal distance. However, these adjusted prices were not equal. Cattle in the Southeast and Intermountain West region had higher prices than cattle in the Midwest, and cattle in the Southwest were lower priced. While actual Midwest calf prices were generally higher than Intermountain West or Southeast calf prices, that difference was less than the cost of transportation to Midwest feedlots. Buyers appear to be absorbing some of the freight cost of more distant cattle at the expense of the closer cattle not receiving an equal transportation adjusted price. What are the management implications of this?
Cow-calf producers who are a considerable distance from major feeding areas will likely receive a lower price than those who are close to major feeding areas for the same quality of calves. However, the findings from the Superior Livestock Sale data, would suggest that producers selling on that sale who are distant to the market are probably receiving a higher price than if they trucked the cattle closer to the feedlots and then sold them directly to the feedlot or went through an auction sale.
There is a big assumption in the preceding statement: that the price at an auction market or direct sale will be at the same level as the Superior Livestock Auction. For cow-calf producers who either sell direct to buyers or who ship to auction barns to sell, I would suggest that you look at prices and transportation costs closely to determine weather you want to pay trucking or rather you want the buyer to pay trucking. Remember, it is dollars in the bank that count, not the actual selling price that matters at the end of the day.