Feeder cattle market looks strong
October 2, 2013
Market fluctuations can have a make-or-break impact on a ranch's bottom line. Every cattle producer knows that. Can niche marketing opportunities have the same financial influence? Probably not, say two livestock market operators, but they may still be worth considering.
Fort Pierre Livestock Auction, Inc., owner Dennis Hanson said that most of his consignors administer pre-weaning shots before selling calves. "The fall shot deal is pretty important," he said, explaining that buyers will generally discount a set of calves that haven't received the vaccinations.
"I don't think the age and source verification is near like it was," Hanson said, of potential premiums. "From what I gather, I don't think it makes a lot of difference now."
Probably the best premiums come from a "drug free" or "all natural" designation, Hanson said, but was quick to point out that freshly weaned calves rarely generate this premium. Rather older, weaned calves or yearlings that fall under the "drug free" category will, at times, be worth a bit more.
"There are times those boys don't need them and they don't give much premium, then there's times they give a lot. I've seen when they have a lot of them around and they don't offer any more for them, and then we've seen from $1 to $5 (per hundred weight) premium on those weaned cattle," Hanson said.
He doesn't encourage people to significantly alter their operations in order to allow for them to sell "drug free" cattle – which means the cattle have never received an antibiotic shot, an implant or consumed antibiotics in feed. Vaccinations are acceptable, and, in fact, encouraged, Hanson said, because when the feeder gets those cattle home, he is especially worried about keeping them healthy. If the feeder has to doctor the cattle, they must be taken out of the drug free program.
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"If your cattle are drug free, then we might as well advertise them that way," Hanson said. "You might as well take advantage of it. But if you're having trouble, you'd better get them taken care of," he added. He has often times spoken with consignors who had been planning to sell their cattle as "drug free" but encountered a disease problem. "I tell them, they've got to doctor them and take care of them because a dead one isn't worth anything." If a producer doctors just one or a few head of cattle, he can mark those in some way, such as with an eartag or notch, and sell the remainder as drug free, Hanson said.
Going into the fall run, the feeder cattle, and even cull cow and bull market "looks awful strong," Hanson said. "No question the numbers are way down and if they don't bury us with imports I guess we're going to be ok." He said one of the "bad things going on" is the lawsuit filed by several meatpacking organizations, along with Canadian and Mexican cattle groups to stop country of origin labeling.
Lemmon Livestock, Inc., owner Paul Huffman said there is usually a pretty solid dollar, up to a $3 premium on drug free yearlings, but he agreed with Hanson that generally feeders don't offer a premium on drug free freshly-weaned or fresh-off-the-cow calves.
"I don't think it pays to not use implants," Huffman said bluntly. "We went back to using them ourselves, we felt like we were gaining 10-12 pounds, up to as high as 20 pounds, and we didn't feel like we were getting anything by not implanting them. At today's prices, even $1.50 per pound on 10 pounds is quite a bit of money."
There is a severe discount at times for calves that haven't received pre-weaning shots, Huffman said, and at times the buyers don't seem to care. "But I think everyone has decided that it pays to do it. It's a good management practice," Huffman said, adding that buyers are now requesting calves with "two rounds of shots."
Huffman said one rule of thumb an experienced cattleman shared once was that the first round of shots provides immunity to 60-70 percent of the cattle, the second round of shots provides immunity to 10 percent more and a third set of shots would protect even 5 to 10 percent more of the cattle.
Huffman said he has never seen a premium for slick cattle compared to branded ones.
Optimistic about the fall market, Huffman said his barn moved about 1,600 head of yearlings on Wednesday, with the bulk of them ultrasounded open and spayed heifers. The first big feeder calf sale will be Oct. 9.
"The 'on feed' report was bullish on Friday, corn keeps getting lower – the fall calf market is looking pretty good if some outside factor doesn't step in," Huffman reported.
"I actually can't believe these feeder cattle are as high as they are. There are reports out that fat cattle haven't made money in 26 months. One thing about a cattle feeder, he won't back up if there is any way he can go forward. They don't give up too easily."
The last three to five years of drought, depending on location, has "put a lid" on cow-calf producers in recent years, Huffman said. "Everybody's finally getting some feed supplies built up again," and this market should help folks who have been sitting dormant for a long time because they didn't have the resources to develop any extra income by feeding or grazing livestock like they normally would.
"There are going to be some big decisions to be made now, whether to background calves or take the money and put it in the bank," Huffman said.
"One thing about it, there are always opportunities if you're not tied down to something – if you don't have your back against the wall," Huffman said, regarding operators who may be deciding how to use any excess feed. "They could maybe buy some lighter heifer calves or some older cows. They can always sell their calves to put some equity in their pocket and then find something else to feed."