New marketing tool

Feb 15, 2013

Last week’s cattle industry convention held in Tampa, FL, was, for the most part, uneventful, and I suppose the National Cattlemen’s Beef Association prefers it that way after years of arguing over the checkoff and governance issues. There was a new committee structure in place that seemed to produce few solid industry resolutions or directives.

About the only thing on producers’ minds was getting ample spring rain in many of the major cow/calfproducing states. CattleFax did, however, forecast better supplies of feed grains and hay for next year, but had a hard time producing a favorable long-term weather forecast. So don’t hold your breath while waiting for those spring rains.

After attending a few meetings, I got the idea that we could start to see a change in price discovery of feeder calves. The auction will continue to remain the major price discovery tool. But documenting your feeder cattle’s performance may become a condition of sale.

After the past few years of unsustainable losses in cattle feeding, cattle feeders are starting to talk about the real value of feeder cattle they buy. At this point in time and perhaps well into the future, feeders are going to take a more comprehensive perspective on the value of your feeder cattle.

It’s well documented that there is over $300 between the best performing feeder cattle and the worst.

It has typically been a business of averages and with cheap feed, feeders could take a gamble on a set of calves, if they bought them cheap enough. With feeding breakevens into the $1.40 range on today’s cattle, many feeders have had enough.

Performance is everything in a feeder’s mind and once a feeder has a good experience with a set of feeder cattle, he will be a regular customer and price will be less of an objective. We have seen the DNA companies attempt to measure feeding traits and quality carcass traits and Certified Angus Beef has gotten into the act marketing a low price limited DNA test they offer feeder cattle buyers: Genemax.

Decatur County Feeders gave a presentation, along with Leachman Cattle of Colorado, that measured the value and performance of many thousands of cattle they have fed and the message was that if your cattle are good enough, you need to feed them yourself to realize the full value of them. Of course, they’re trying to drum up some business, but the facts remain the same. You’re leaving money on the table, even in today’s market, by not feeding your cattle that have superior performance genetics, regardless of the quality component that many grid pricing systems reward.

However, if they’re going to buy your feeder cattle, they want more information and they’re going to buy specific kinds of cattle for marketing windows depending on the Choice/Select spreads. For instance, history shows the Choice/Select spread is the lowest during the winter months, since they market on a grid and only sell to Cargill in Dodge City, KS. They are more concerned about yield grades. If they are marketing cattle in the fall when the Choice/Select spread is at its widest point, they will try and buy feeder cattle that will make the grade and make it in a big way; the top third of Choice and better is where the big money is.

The folks at Decatur County Cattle Feeders have been working with Leachman Cattle of Colorado, feeding cattle produced by Leachman genetics. They are both concerned about feed conversion and overall profitability back to the ranch. They are using Leachman’s proprietary “Dollar Profit Index” as a way to validate the feeding value of Leachman’s customers’ cattle. Warren Weibert and Dan Dorn tell us that the dollar value index is working well at discovering and identifying those premium performance cattle.

The Dollar Profit Index accounts for all economical meaningful traits through the use of EPDs, which is weighted to overall ranch profit. Of course, this is a way for Leachman to differentiate their genetics from other seedstock producers. But, the numbers back it all up.

I can see this information becoming a condition of sale for some feedlots that want to apply the additional management to the cattle. They simply want to identify the cattle they should buy and the ones to avoid. Most feeders already know this to some degree, but it will benefit commercial producers who can market their cattle with performance documentation and appeal to more buyers. Remember, quality always sells, but there are two different measurements of quality and value at different times of the year. — PETE CROW