Post on 18-Jan-2018
description
Finding Profitability
Through Backgrounding or Finishing
Calf Pricing
• Decision Process• Cow Calf• Backgrounding• Finishing• Basis Charts and BeefBasis.com• Seasonality
Basis
Basis = Cash Price - Futures Price
If Cash = $120 and Futures = $110
Basis =
• Estimated basis is a forecast based on history.
September Feeder Cattle
October Feeder Cattle
November Feeder Cattle
July Fed Cattle
A Marketing Plan
A marketing plan should address:– short term survival – long term success– key elements – map to destination
Key Elements of a Marketing Plan
• Marketing objectives• Cost of production • Current market environment• Contingency plans• Flexibility
Pricing Targets
• Establish minimum price objective– Risk tolerance– Your cost of production
• Could use Beef Cow/Calf Enterprise Budget
• Your records provide better information
Strategies for Marketing Spring Calves
• Wean, Sell Nov. 1• Background, Sell Jan. 1• Background, Finish, Sell July 15• Wean Sep. 1, Finish, Sell June 1• Wean Nov. 1, Finish, Sell July 1
Wean & Sell Nov. 1• Calves weaned & sold on Nov 1 (550#) • Benchmark strategy • Cost of Production—Cow costs• Market Value Factors
– Pre-conditioning– Source verification
Wean & Sell Nov. 1• Risk Management Factors
– Forward Contract• What, When, Where, Price
Sale Barn Video Auction
Background & Sell Jan. 1• Wean November 1• background 60 days• Sell at ~670# on January 1• Increased risks
– Price risk and opportunity – Rate of gain risk and fleshiness– Mortality and morbidity risk
Background & Sell Jan. 1
• Risk Management Factors– Forward Contract– LRP Insurance
• Minimum coverage period is 13 weeks, so insurance must be purchased as appropriate
Background & Finish
• Previous backgrounded calves put in feedlot January 1 and fed until August 20
• Increased Risks– Price risk– Opportunity cost– Mortality, morbidity– Weather– Feed price
Wean Sep. 1, Finish
• Lower cow costs • More feed yardage costs• Improved quality grade