  BeefTalk:
Projected Steer Value Is Key in Retained Ownership Decisions
By Kris Ringwall, Extension Beef Specialist,
NDSU Extension Service
Any discussion about source verification eventually gets around to including
the question of retained ownership. History has demonstrated that the challenge
of source verifying cattle increases with every transfer of ownership.
Cattle transfers are not recorded in the same fashion as land and cars.
Cattle slip quietly over the horizon, as does most personal property, upon sale.
The concept of extending ownership of cattle further into the processing
cycle has been discussed for years. At the North Dakota State University
Dickinson Research Extension Center, we have retained ownership of our calves
since 1996. The experience, which has been very rewarding, has provided some
interesting discoveries. My observations are based on data collected and some
industry insights.
Before any details are examined, the basic concepts of retained ownership
need to be discussed. Our experience at the center has shown us that a big
picture look is important. In that big picture, there are two general points of
value involved in marketing beef. They are:
- The actual value of a marketed steer is the sum of the retail price of all
the parts, and
- The value of the carcass is the focus of retained ownership.
Unfortunately, the sum of the retail price of all the parts is considerably
more than the producer gets for a calf, and, for all practical situations, the
number is relatively meaningless to a cow-calf producer.
The expense side of the equation is difficult to understand and completely
out of control of the local cow-calf producer. Once a calf is sold, the new
owner merchandises the carcass. Despite less than desirable relationships among
segments of the beef production system at times in the United States, the
current not previous owners have control. An important point, as the old saying
goes, is change what you can and accept what you cannot. A successful manager
knows the difference.
In principle, the value of the carcass should be the best indicator of the
value of the sum of all retail products. Some would not agree. However, agree or
not, for the cow-calf producer, understanding carcass value is easier than the
sum of retail values of all the products.
Regardless of new or old regulations, the goal of a cow-calf producer is to
obtain the greatest percentage of the value of the calves produced, when hanging
on the rail. The hanging value is a legitimate benchmark and goal, only
obtainable through retained ownership. That value is also tangible – it can be
recorded and reported back through the production system.
The Food and Agricultural Policy Research Institute based at Iowa State
University and the University of Missouri-Columbia gathers and reports such
data. The "2003 U.S. Baseline Briefing Book" indicates 1,100 lb. to 1,300 lb.
Nebraska direct steers are predicted to average $74.51 in 2003, reach a high of
$78.23 in 2005 and then decline to a low of $68.33 in 2011. No predictions are
perfect, but for those wanting to explore retained ownership, the value you seek
from your calves can be estimated.
Using those numbers, fed cattle marketed at 1,100 to 1,300 pounds this year
should average $819 to $968. The peak value in 2005 for the same weights should
be $860 to $1,016. The low at the end of the decade is estimated to be $751 to
$888.
These are annual averages. (Cattle-Fax notes a spread of approximately $13
per hundredweight within any given year.) In other words, from the traditional
spring highs to the seasonal lows in late summer, fed steer values will vary
$143 to $169.
Cow-calf producers need to be aware of the long-term trends, commonly called
the cattle cycle, as well as yearly seasonal variations in cattle prices before
moving into retained ownership.
The biggest lesson we’ve learned has been to appreciate the amount of total
value a calf has on the rail. That is the starting point, and an important point
in plotting a marketing plan. Other factors will certainly control the end
profit, but as you look to the future, the options of retained ownership need to
be thoroughly understood.
May you find all your ear tags.
Your comments are always welcome at
www.BeefTalk.com. For more information,
contact the North Dakota Beef Cattle Improvement Association, 1133 State Avenue,
Dickinson, ND 58601 or go to
www.CHAPS2000.com on the Internet. In
correspondence about this column, refer to BT0147.
###
Source: Kris Ringwall, (701) 483-2427, kringwal@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu
Click here for a printable PDF version of this graphic.
(11 Kb b&w graph)
Click here for a printable EPS version of this graphic.
(115 Kb b&w graph)
Click here for a EPS file of the BeefTalk logo suitable for
printing.
(100KB b&w logo)
Graphic...
Predicted Prices for Nebraska Direct Steers (1100-1300 lbs.)
--------------------------------------------
Dollars per Range in
Year Hundred Weight Value per Head
--------------------------------------------
2003 $ 74.51 $ 819-968
2005 $ 78.23 $ 860-1,016
2007 $ 73.49 $ 808-955
2009 $ 69.48 $ 764-903
2011 $ 68.33 $ 751-888
--------------------------------------------
--------------------------------------------
|
