AG CORNER: Understanding feeder cattle price slides – Stillwater News Press

Feeder cattle prices depend on the weight of the cattle with lightweight cattle typically having the highest price per pound (or hundredweight) and lower prices for heavier cattle. Not only do prices vary across cattle weights but the size of the price adjustment depends on the weight of the cattle.

Price slides are a measure of the amount of price adjustment as weight changes from a base weight.

Price slides have a number of uses, the most common of which is adjusting the price of forward contracted cattle if actual weight is different from the specified base weight.

Price slides are also useful for producers to evaluate price changes for the weight gain of calves in a preconditioning or short backgrounding program or perhaps the additional weight from creep feeding calves. Prices slides are often stated in terms of traditional rules of thumb, e.g. a 10 cent slide on calves or a 6 cent slide on yearlings.

The price volatility of recent years has shown that these rules of thumb using absolute levels are inadequate to accurately capture price adjustments over a wide range of price levels.

Price slides depend on the price level and thus are more accurately stated as a percent of the base price. Table 1 shows annual average and monthly average price slides for selected weights of steers and heifers. It is apparent that price slides are not only different for different weights but also vary for steers and heifers and at different times of the year. As an example of how to use these price slides, suppose the base price of 575-pound steers is $150/cwt.

The annual average price slide is 6.7 percent, which results in a price adjustment of $10.05/cwt. If the steer actually weighs 30 pounds more or 605 pounds, the price would be adjusted down by $3.02/cwt ($10.05 x 0.3 cwt.) to $146.98 ($150-$3.02). In this example, the price slide is close to the traditional 10-cent slide.

However, while the percent price slide is constant, the absolute price adjustment depends on price level. Thus, the 575-pound steer would have a price slide of $8.04/cwt. if market price was $1.20/cwt. or $12.06/cwt if the market price was $180/cwt.

It is evident from Table 1 that the percent price slide for heifers is generally lower compared to steers for the lighter weights but is roughly equal to the steer price slide for heavy feeders. It is also apparent that price slides for both steers and heifers vary across months.

Price adjustments can be fine-tuned using the monthly average price slides. In general, price slides are relatively constant across months for light weight calves and for the heavy feeders.

Price slides in the middle feeder weights (575-725 pounds for steers, 550-700 pounds for heifers) have wide variation across months. For example, 675-pound steers have an annual average price slide of 4.0 percent, which varies from 8.2 percent in March to essentially zero in October.

Price slides expressed in percentages adjust automatically and appropriately to changing market prices. Understanding price slides can help producers improve cattle marketing and evaluate feeder cattle production alternatives. 

Poor temperament adversely affects profit

October is a traditional weaning and culling time for spring-calving herds. Weaning for value-added calf sales is already underway. This is a time when producers decide which cows no longer are helpful to the operation and which heifer calves will be kept for future replacements. Selecting against ill-tempered cattle has always made good sense. Wild cattle are hard on equipment, people, other cattle, and now we know that they are hard on the bottom line.

Mississippi State University researchers (Vann and co-workers. 2006. Southern Section of American Society of Animal Science) used a total of 210 feeder cattle consigned by 19 producers in a “Farm to Feedlot” program to evaluate the effect of temperament on performance, carcass characteristics, and net profit.

Temperament was scored on a 1 to 5 scale (1=nonaggressive, docile; 5=very aggressive, excitable). Three measurements were used: pen score, chute score, and exit velocity. Measurements were taken on the day of shipment to the feedlot.

Exit velocity is an evaluation of temperament that is made electronically by measuring the speed at which the animal leaves the confinement of the chute. Exit velocity and pen scores were highly correlated. As pen scores increased, so did exit velocity. As pen score and exit velocity increased, health treatments costs and number of days treated increased, while average daily gain and final body weight decreased. This outcome makes perfect sense. Other studies have shown that excitable temperament can diminish immune responsiveness, with more temperamental calves having a reduced response to vaccination compared to calm calves.

In the Mississippi study, as pen temperament score increased, net profit per head tended to decline. Pen temperament scores and net profits per head were as follows: 1=$121.89; 2=$100.98; 3=$107.18; 4=$83.75; 5=$80.81. Although feed and cattle price relationships have changed since this data was collected, one would expect similar impacts from the temperaments of cattle under today’s economic situation.

“Heritability” is the portion of the differences in a trait that can be attributed to genetics. The heritability of temperament in beef cattle has been estimated to range from 0.36 to 0.45. This moderate level of heritability indicates that real progress can be made by selecting against wild cattle. Whether we are marketing our calf crop at weaning or retaining ownership throughout the feedlot phase, wild, excitable cattle are expensive.

Payne County Extension Educators Nathan Anderson, Dea Rash, Suzette Barta, Keith Reed and Summer Riggins contributed to this report.

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