1. Factors Affecting Feeder Cattle Prices
(understanding the link between genetics, management, marketing, and prices)
ECON 337 Agricultural Marketing: 2:10 – 4:00; March 11, 2014
Lee Schulz – –
Department of Economics
Iowa State University

2. What exactly does “right” mean?
Marketability: Buy and sell them “right”…
What exactly does “right” mean?
Buy low – sell high make lots of money!
As a seller, know what your buyers are looking for and strive to deliver it to them
As a buyer, recognize how the various traits and characteristics are valued and buy what best fits your program (i.e., your comparative advantage)
(of course this doesn’t work for everybody as some are buying from those selling)

3. What drives/determines feeder cattle prices…3

4. Breed impacts price… Some things have changed over time…
BASE
Other things have been more constant…

5. Sex and breed impacts price…
Source: Holton Livestock Exchange, Inc. (Northeast Kansas)
-- Discount on heifers (vs. steers) fairly constant across sales ($5.50-$8.93)
-- Black/BWF consistently brought higher prices than other breeds/colors

6. Breed impacts price…
Source: CAB “Where’s the Premium” study,
-- Target 500 pound calves in the fall and 700 pound feeders in the spring
-- Consistent premium on Angus-influence calves and premium has generally been trending up over this time period 6

7. Weight impacts price…
Source: Holton Livestock Exchange, Inc. (Northeast Kansas)

8. Weight impacts price…

9. Corn price impacts weight price relationship…
“Low” CN: FC price ↓ more rapidly as weight ↑
Lightweight feeders worth more relative to
heavy feeders because COG lower

10. Live cattle price impacts weight-price relationship…
“Low” LC: FC price ↓ less rapidly as weight ↑
Lightweight feeders worth less relative to
heavy feeders

11. Lotsize impacts price…
Source: CAB “Where’s the Premium” study,

12. Several other factors impact price…
Feeder Cattle Trait
2001
2002
2003
Frame
Large Frame
0.174
-1.674
-3.524
Medium Frame
Base
Small Frame
N/A
3.154
Muscling
Heavy Muscled
1.986
2.035
-2.475
Moderately Muscled
Thin Muscled
-7.224
Condition
Thin Flesh
2.731
-2.419
3.754
Average Flesh
Fat Flesh
-3.024
-3.327
1.025
Health
Healthy
Not Healthy
-5.789
-7.82
Uniformity
Uniform Lot
Uneven Lot
-1.948
-3.154
-3.174
Source: Oklahoma Quality Beef Network (OQBN) auction sales, AGEC 602

13. Factors impacting price change over time…

14. What about preconditioning calves…
Premiums of +$6/cwt when calves are vaccinated and weaned
Premiums tend to be higher for steers than heifers
Source: Factors Influencing the Price of Value-Added Calves at Superior Livestock Auctions (Lance Zimmerman MS thesis, KSU.
So does it pay to precondition calves?

15. What about age and source verification programs…
Premium of around $1.50-$2.00/cwt pretty consistently over last several years
Source: Factors Influencing the Price of Value-Added Calves at Superior Livestock Auctions (Lance Zimmerman MS thesis, KSU.
Will premium disappear as Age & Source Verification becomes more common?

16. USDA Feeder Cattle Grades
Feeder Cattle Reports
&
USDA Feeder Cattle Grades
Frame Size and Thickness (Muscling)

17. USDA Feeder Cattle Grades Frame Size
3/31/2017
USDA Feeder Cattle Grades Frame Size
Large
Medium
Small
USDA/MRP/AMS
US Feeder Cattle Standards

19. USDA Feeder Cattle Grades Frame Size - Large
3/31/2017
Tall and long bodied
½ inch fat
Steers over 1250 lbs.
Heifers over 1150 lbs.
USDA/MRP/AMS
US Feeder Cattle Standards

20. USDA Feeder Cattle Grades Frame Size - Medium
3/31/2017
Slightly tall
Slightly long bodied
½ inch fat
Steers 1100 to 1250 lbs.
Heifers 1000 to 1150 lbs.
USDA/MRP/AMS
US Feeder Cattle Standards

21. USDA Feeder Cattle Grades Frame Size - Small
3/31/2017
Not as tall as Medium
Short bodied
½ inch fat
Steers less than 1100 lbs.
Heifers less than 1000 lbs.
USDA/MRP/AMS
US Feeder Cattle Standards

23. What do premiums/discounts indicate…
Lot size and uniformity are very important
Breed/color impact price
Time of sale important (probably hard to manage)
Dehorn and castrate early
Market healthy cattle
Stay away from extremes (frame, condition, fill)
Results written up in paper on (and (embedded in decision tool)

25. These three buttons take the user to tabs showing hedonic model results (i.e., tables we have already looked at).
These four buttons are linked to tabs that allow the user to examine how changing cattle traits impacts price. Partial budget tab also allows user to bring in costs in a simplified way.

29. Tab that allows three side-by-side comparisons

30. Impact that horns have on price…

31. Impact that sorting cattle into smaller (-) more uniform (+) groups has on price…

32. Partial budget to look at net returns of making a change that affects price…

33. Impact that a 45-day preconditioning has on price/returns…

34. Partial budget to look at net returns of making a change that affects price…
$27.54

36. Feeder cattle price forecasts…

38. Value of gain projections…
Beginning Date
Ending
Date
Beginning Weight, lbs
Ending Weight, lbs
Weight Gain, lbs/head
ADG, lbs
Value of Gain, $/cwt
01/11/14
02/24/14
550
650
100
2.27
$126.11
03/09/14
1.75
$130.73
04/09/14
750
200
$121.05
05/05/14
$127.38
05/11/14
850
300
2.50
$117.40
06/10/14
2.00
$120.81
Note: Projections derived for the Dunlap, IA market using BeefBasis.com
Related information available at BeefBasis.com 

39. Historical Value of Gain…

40. For more information related to livestock marketing and risk management tools see…
Lee Schulz – –
Department of Economics
Iowa State University