Know your cattle, check the market
Casper – Addressing items to consider before retaining ownership, American Food Groups Contract Manager Tim Schiefelbein says producers need to know their cattle, check the markets and seek out the opportunities to add value.
“Do you know your genetics?” asks Schiefelbein of the first question to answer before making a determination to retain ownership on your cattle through harvest. “ If the answer is no, gathering additional information is an advisable first step. Opportunities to do so exist through the University of Wyoming.
“Does your seedstock producer know what he’s talking about when you mention retained ownership and carcass?” asks Schiefelbein of another consideration. Beyond his role with American Food Groups, Schiefelbein is part of his family’s seedstock and feedlot operations. He says it’s important to know your cattle’s efficiency once in the yard. “If you can get a pen of cattle to convert at 6.9 dry matter instead of 7.0 that’s one-tenth less feed per pound of gain. That’s worth $4 per head. One-tenth is $4 per head.”
“You’ve got to know how your cattle perform, there’s no question about it,” says Schiefelbein. While a rancher’s seedstock producer doesn’t have to feed out thousands of animals, he says it’s important they know their animals and how they perform.
While it’s not always the case Schiefelbein says, “A lot of guys have good feeding and carcass cattle and they don’t know it. Don’t think there are just a few who have these elite feeding cattle.”
“You can get good carcass and feeding cattle while making good mother cows that fit in states like Wyoming, western South Dakota and eastern Montana,” says Schiefelbein. “You can have cattle that work on tough ranches, in the feedlot and have good carcasses.”
Once you have the information on your calves and have decided to retain ownership, Schiefelbein says spend some time figuring your break-even point. “What is the futures price when my cattle will be finished?” says Schiefelbein of a question that must be answered. “What’s your cost of gain?” he says of another question that can be answered by working with a feedyard. University personnel, he says, can help in arriving at these figures. Roughly, he says, if corn is at $3.00 cost of gain is about 60 cents a pound. At $4.00 corn, the cost of gain is 80 cents per pound.
“There are certain feedyards that can beat that rule of thumb,” he says, “but use that rule of thumb when you talk to the feedlot or when you’re doing a breakeven to see if it makes sense to feed your cattle.”
Schiefelbein says, “Once you know when your cattle go out, the futures and your cost of gain, calculate backwards and see what a calf is worth. When you figure that out you can compare it to the market for calves or yearlings.”
He says the price will usually be four or five dollars lower than that being paid by the feedlots. “There’s more bunk space than there is feeder cattle,” he explains noting that feeders bid beyond the breakeven to fill their yards.
Given that small difference, it’s easy to question why anyone would retain ownership. “If you have superior cattle,” explains Schiefelbein, “that feedlot will not bid that superiority into your calves.” He says it’s an opportunity to be rewarded for the genetics you’ve built into your calves. He says a low market is another reason to retain ownership.
“If you do have high-powered genetics, they’re going to do better than you calculate for a breakeven,” says Schiefelbein. “That’s one way you can come out better.”
Schiefelbein stresses the importance of picking a quality feedyard. Visit the yard, he says, look at the feed and how clean it is and ask the owner about different pens of cattle. “You’ll know which ones are good and which ones aren’t,” he says of choosing a feedyard. He also recommends requesting references.
Seek out opportunities to add value, advises Schiefelbein. “If you’re going to feed cattle and they come from your herd, you can easily source and age verify the cattle.” His family has averaged a $30 per head premium on source and age verified cattle over the last three years. There’ve been times, he says, when that premium was the profit on a pen of cattle.
“If your program is working you may not have to look at the option of retained ownership,” says Schiefelbein. “If you’re having trouble, the market is slow and you know you have the high quality genetics, there’s an option here.”
It’s a decision that requires a great deal of thought. “Ask yourself those questions and go through the first steps,” says Schiefelbein. Smaller steps are also available such as partnering on your cattle with the feedyard or keeping cattle on grass and selling them at a higher weight in the spring. Schiefelbein says some years there is a chance to receive an increased price retaining ownership on heifers. “Heifers will grade better than steers,” he says noting that they’ll sell to the packer at an equal price to steers. “The cost of gain is generally about a nickel higher and they won’t get as heavy,” he says.
“On average,” says Schiefelbein, “if you know what you have, the grid is going to net you more money over time. That’s not on every pen, but over time it will.”
Retaining ownership without the necessary background information isn’t advisable. “There might be a good reason your cattle are bringing less,” says Schiefelbein to those thinking they might see a quick profit. “If you don’t get a good buy on your calves year after year, there’s probably a reason.”
Tim Schiefelbein was a speaker in the ongoing webinar on retained ownership hosted by the University of Wyoming Animal Science Department and the Wyoming Business Council’s Agribusiness Division. Jennifer Womack is managing editor of the Wyoming Livestock Roundup and can be reached at email@example.com.