Source: Tim Petry, Livestock Economist, North Dakota State University Extension Service
A couple of weeks ago, five of my animal science colleagues and I presented an educational program by videoconference to several sites in North Dakota entitled "Backgrounding Cattle 2012: High Feed Prices." I discussed cattle prices and outlook; Karl Hoppe, area Extension livestock specialist, talked about feed cost and rations for backgrounding calves: corn vs. byproducts vs. roughages; John Dhuyvetter, area Extension livestock specialist, presented systems and budgets for backgrounding calves: cost of gain, slow vs. fast growth; Gerry Stokka, Extension livestock stewardship specialist, talked about the art of weaning without stress; Doug Landblom, animal scientist, presented alternative backgrounding methods: feeding on the field; and Carl Dahlen, Extension beef cattle specialist, discussed backgrounding heifers: replacements or feeders? The talks were approximately 20 minutes long and each is available along with accompanying PowerPoint presentations at: www.ag.ndsu.edu/cattledocs.
There is a wide range in prices of both feed and calves geographically in the U.S. this year due to the drought that has plagued much of the country. For example, 400-500 lb. steer calf prices in Southern Plains have been volatile in the last month as the potential for winter wheat grazing continually changes. USDA-NASS reported the October average price of "Other Hay" in N.D. at $87 per ton, which was the lowest price in the U.S., and compares to a $146/T national average. However, $87 seems high to N.D. producers who paid $49/T in October last year and $60 just three months ago in July. In spite of dry conditions in N.D., many producers were able to put up enough hay when CRP was opened for emergency haying. However, other hay averaged $152 in S.D. in October where the drought was more severe, and quite a bit of hay is moving from N.D. into S.D. and Nebraska. In the Western Corn Belt, an unusual amount of drought damaged corn was cut for silage this fall. Although some will be used to maintain beef cows through the winter, a considerable amount is expected to be used for backgrounding calves.
One question we had been receiving and we tried to address at the backgrounding meeting was that given feed costs are much higher than last year, could it be more profitable to feed calves a cheaper, roughage based ration? Our analysis using current N.D. feed and calf prices showed more profit potential for feeding the more expensive 2.75-3 lb. per day gain than a 1.75-2 lb. gain. But remember, feed and calf prices do vary widely throughout the U.S. and have been volatile as well; so producers need to carefully analyze expected costs and returns in their area.
Even in the same geographic region, a wide range in calf prices for the same weight and grade is occurring and may offer opportunities for increased profits from backgrounding. For example, at North Dakota markets last week prices for 550-600 lb. medium and large #1 steers ranged from $151.75 to $168.75. And the discount for heifers may offer potential as well with 550-600 lb. heifers ranging from $133.75 to $153.50. At our backgrounding meeting, N.D. producers expressed considerable interest in backgrounding heifers.
The fed cattle market showed some weakness last week, but at levels near those of the previous two weeks. 5-area fed steer prices on a liveweight basis averaged $126.17 per hundredweight, down 41 cents for the week. Dressed weight prices declined $1.41 for the week to average $196.37. Boxed beef prices were pressured by hurricane Sandy affecting consumer demand in the highly populated Northeastern U.S. Choice boxed beef prices declined $3.15 for the week to $195.34. The Choice-Select spread continued to exhibit seasonal strength and closed up $1.97 at $18.25. A lighter volume of feeder cattle were sold last week, but an increasing seasonal volume of calves were available. Prices for calves were uneven and depended on volumes and weather conditions in different regions of the country. Corn prices gained 9 cents per bushel to close at $7.74 in Omaha on Thursday.