NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
November 24, 1999
Harlan Hughes, Extension Livestock Economist
NDSU Extension Service
Because of my role with the North Dakota State University Extension Service, I'll be speaking at cattle producer workshops and conferences on the economic issues facing U.S. and Canadian beef industries in the coming weeks. A benefit of speaking to these groups is the opportunity it gives me to interact with cattle producers from around the country and Canada.
In addition to my speaking engagements, this Market Advisor column also generates contacts via phone calls, letters and faxes. My third major contact with cattlemen is through my Internet Web site (www.ag.ndsu.nodak.edu/cow). The number of producers contacting my Web site is growing and there is also a growing number of agricultural professionals, who in turn work with cattle producers, accessing the Web site.
In addition to this column, an example of the kinds of educational material that I routinely post to my Web site include the weekly livestock market price analyses for four northern plains salebarns (West Fargo, N.D.; Bismarck/Mandan, N.D.; Dickinson, N.D.; and Billings, Mont.). The USDA Agricultural Marketing Service (AMS) hires a part-time farmer to sit in these salebarns with a portable computer and collect weekly market price data. These AMS price summaries serve as my market price data sources for the four salebarns that I monitor weekly.
My secretary and I take this weekly AMS price data and statistically analyze the data and post market prices in 25-pound weight increments for 400- to 925-pound steer feeder cattle. We also post price slides, the value of added weight, and a calculated futures market price basis for feeder cattle in this same set of tables.
Let's look at the market prices posted for western North Dakota for the week beginning Nov. 19. Feeder calves weighing 500 to 600 pounds averaged $89.58 to $98.16 with 550-pound feeder steers averaging $93.57 per hundredweight. With this year's low feed prices and feed surplus, the demand for lightweight feeders is very strong. For example, during the week beginning Nov. 12, I calculated that 400-pound feeder steer calves averaged $109 per hundredweight. My analysis suggests that the best profit potential for these calves is to grow them slowly during this winter and then dump them out to grass next spring with a target for marketing these calves as 800-pound yearlings off grass in late August 2000.
Prices slides are frequently used when contracting weaned calves. I have been asked by cattle producers to generate and publish price slide data that producers could access when negotiating contract agreements. My calculated price slides also are posted weekly.
The problem is that market price slides vary with the weight of feeder calves. For example, the price slide for 500-pound steer calves in western North Dakota was calculated at a minus $9.78 per hundredweight for the week beginning Nov. 19. On-the-other-hand, price slides for 600-pound steer feeder calves was calculated at a minus $7.38 per hundredweight and finally, price slides for 800-pound feeder steers were calculated at a minus $2.58 per hundredweight.
The "value of last pound" demonstrates what price slides do to average prices per hundredweight as feeder calves get heavier. For example, the value of the last pound should be used to evaluate the economics of any added weight brought about by weight-increasing technologies. The value of last pound at 550 pounds was 46 cents per pound. The value of last pound at 800 pounds was 59 cents per pound. Clearly, price slides ensure that the value of added weight is always less than average price.
Each week I update and post on my Web site that week's planning price projections, and the budgeted marketing implications of those planning prices for marketing this year's spring-born calves. My goal for cattlemen, agricultural lenders, professional farm and ranch management consultants, county agents, farm business management instructors, etc. is to allow them to access my latest marketing outlook whenever the need arrives. I also generate and post planning prices for alternative marketing strategies for 1999. These posted planning prices cover the pertinent time period relating to the marketing of 1999 calves. Cattle producers should be able to find an appropriate planning price for almost any marketing alternative that they may want to evaluate.
For long-run planning, I am also posting long-run planning prices for the next 10 years--one complete beef price cycle--to my Web site. In all of my speaking engagement this winter, I plan on focusing on management strategies that cattle producers might explore to make this next beef price cycle work for them.
With each beef price cycle comes a real opportunity for astute beef cow producers to make substantial profits. The amount of profit that a rancher can capture from the next beef price cycle will be influenced less by production decisions such as weaning weights and calving dates than by the amount of strategic business planning that a producer does. The importance of strategic business planning is what is differentiating the 1990s from the inflation/deflation era of 1980s. In the 1990s, profits have depended primarily on asset productivity while in the 1980s profits depended primarily on asset appreciation. Without strategic business planning, I doubt that you will share in the profit potential of this next beef price cycle. These are all points that I will be emphasizing in my winter speaking engagements.
Because I learn so much from interacting with each and everyone of my readers that I have decided to post my speaking schedule in this market advisor in hopes that each of you will come and visit with me. I want to first meet you, then learn about your beef business and finally learn what you think are the critical economic issues facing you. Maybe, I can even write a future column on your critical issue.
My phone number is (701) 231-7380. My fax number is (701) 231-1059 and my e-mail address is hhughes@ndsuext.nodak.edu . Please contact me and share what's on your mind.
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Source: Harlan Hughes (701) 231-7380
Editor: Tom Jirik (701) 231-9629
Click here for a pdf version of this graphic. (20KB b&w table)