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