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