What Should I Do With My Calves?

That is a common question the last couple of months for people who haven’t yet sold their calves this fall. The market is tough and doesn’t show much mercy for those that still own their calves.

But even with all the gyrations in the market, there are options and opportunities to consider when valuing and determining the best marketing options.

For instance, just because someone bids you a price and that is the market price for a calf at a particular point in time, it doesn’t mean that is the calf’s value. A cow/calf producer can market a calf at different stages in the calf’s life and value the calf based on the futures market at different points down the road.

The different marketing opportunities can be defined as:

1. Selling the calf today
2. Feeding the calf and selling as a feeder calf in the spring
3. Feeding the calf in a finishing lot and selling it as a finished animal
4. Partnering with a feedyard and finishing the animal

Selling the calf today at the bid is certainly an option that removes a lot of the risk in ownership, but it isn’t always the best option in maximizing the calf’s value. An example would be selling a 600 lb. steer calf on December 1st at $.90/lb. Projecting a breakeven cost to finish the calf would look like this:

In this scenario, if the futures and cash price are the same at the time the steer is harvested ($0 basis), a person would have less risk selling the calf @ $.90 than feeding it. If the August live cattle futures are higher than $.86, it would be more advantageous to feed the cattle to finish. This does not include any premiums for the cattle if they were fed including age and source premiums ($35/hd), CAB premiums ($20-$60/hd) or other quality grade premiums. Any premiums would increase the value of the calf if it is held to finish.

Feeding the calf and selling it as a feeder in the spring would also be an option. Pricing the 600 lb. calf at $.90/lb. on December 1st and feeding it in a growyard until March would look like this:

In this scenario, the typical cash price for an 825 lb. steer is $.10/lb. under the March feeder cattle futures during March. So if the feeder cattle futures in March are above $.96/lb. a person would be better off to feed the steer in a growyard and sell him as an 825 lb. feeder in March versus selling him at $.90/lb. as a 600 lb. calf.

In today’s market, it has made more economic sense in many instances to feed cattle to finish rather than selling them at the current market bid or to feed them and sell them as feeder cattle in the spring.

The market changes everyday, so it is important to value the current bid for your cattle versus the alternative of owning them for a longer period of time to take advantage of a premium market in the

future. If a cow/calf producer doesn’t want to assume all the risk in extended ownership, many feedyards are happy to partner with producers on their calves. This allows the producer to get feedback on their calves without assuming all the ownership risk. The calves can also be financed through the feedyard if there are cash flow considerations.

The examples above give the cow/calf producer a method to determine the “value” of their calves at a point in time versus “taking” a market price for the calves and figuring “That’s all their worth.”

If you have additional questions, or need more information, it’s also a good idea to consult with folks who have expertise in cattle marketing. In many instances, they can help take some of the guesswork out of the marketing equation, and alleviate some of the worry you may be experiencing this year about when and how to market your cattle. Oregon State University has some good tools that can be used to evaluate enterprise costs that may be helpful in determining your costs.

If you have questions or would like to evaluate your marketing alternatives feel free to call me in North Powder.

You can reach me at 541-898-2288. I’d be happy to talk with you.

Ron Rowan