New resource helps producers facing volatile prices

News
Oct 30, 2009
by WLJ
New resource helps producers facing volatile prices

Cattle producers have a new tool to help them develop a marketing strategy, thanks to the work of livestock economists working with the Iowa Beef Center and Iowa State University (ISU) Extension.

John Lawrence, Iowa Beef Center director, and Shane Ellis, ISU Extension livestock economist, spearheaded the development of the Cattle “Crush Margin” tool now available online. This forecasting resource projects the gross margins of fed cattle that will be marketed over the next 16 months. The projections are based on futures prices and the historic Iowa basis for live cattle, feeder cattle and corn.

“During the past three years, livestock producers have faced dramatic volatil ity

in the livestock and feed prices,” Ellis said. “This new resource emphasizes the importance of establishing a profitable gross margin rather than focusing only on maximized revenues.”

Using the projected gross margin as a barometer, it is possible to identify the opportunities when profitability could be secured with a hedge or other price risk management technique. Projections are updated online every Wednesday, or more often if significant futures price fluctuations occur.

A similar decision-making tool is also available for swine finishers. The crush margin tool and accompanying resources can be accessed through www.iowabeefcen ter.org/margins. — WLJ

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