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Serving: Central

In Arkansas: UA studies cattle discounts/premiums

For central Arkansas, 2005 was the second driest year on record. In mid-June of 2006, the consequences are still being felt by cattlemen.

“It's a crucial time for cattle producers,” says Tom Troxel, Arkansas Extension beef cattle specialist. “Some producers were lucky because they had some hay left over from 2004. But that was fed in 2005 and last winter.”

In 2005, the first cutting of hay was 40 percent to 60 percent of normal. In many cases, the second and third cuttings were nearly nonexistent.

“Last winter was very dry. In April, we began receiving some good, widely-scattered showers into mid-May. But since then, we've fallen into a summer rainfall pattern — it's been very sketchy.”

Producers have been cutting hay since mid-May. But things are at a tipping point.

“If pastures don't receive more moisture in June and July to assist with the second and third hay cuttings, producers will be in critical shape.”

Already, there's little hay to be found in the state. That increases the likelihood it will have to be imported and/or the cow herd size will have to be reduced.

East Texas is in similar shape. “They're dry and very worried about hay crops, too. The hay situation — not only feeding cattle through next winter, but just getting them to the winter — is a dicey proposition.”

Are the markets responding to this?

“It's quite interesting. The markets have held up very well — and they did last year, as well.

“If you look at the nation's cow herds collectively, producers across the country are expanding numbers. But for Arkansas, I suspect we'll be fortunate to just maintain current numbers through 2006.”

This is the time of year when producers normally see feeder calf markets begin to drop until the fall. The real question is how far will they fall? Troxel says predictions are for cattle prices this fall to be lower than they were in the fall of 2005.

The study

Last year, Troxel and colleagues set up a study to determine the significant factors affecting the selling prices of calves in Arkansas livestock markets. To gather needed data, they conducted a survey that ran the entirety of 2005.

“Every week with an auction, we collected data. That meant we worked about 15 auctions and over 105,000 head of cattle.”

Among the factors studied were where the calves were sold, whether they were sold individually or in groups, the gender, the breed, the color, muscle scores, horns or polled, frame size, body condition, health of the calf, and age. The weight and selling price were also collected.

Troxel found the number one factor affecting the selling price of calves is whether they're healthy or not.

“Another thing we found is that calves that are sick, stale or have bad eyes are discounted from $12 per hundredweight to $35 per hundredweight. That's significant.

“Buyers also paid attention if a calf was sold as preconditioned. That class of calves got a $4.26 premium above the average sale price. So, for a 500-pound calf, that's an extra $21.

“That's something we're seeing in the industry: more effort to background and precondition to help reduce future sickness. It looks to me buyers are realizing the value of that.”

Producers often want to know exact reasons why cattle are discounted or why certain factors receive premiums. For example, calves that were sold individually went for the average sale price. Those sold in groups got $2 to $4.50 premiums.

“That tells me buyers want uniform groups. I emphasize producers look at the opportunities to learn from this and do a better job of marketing. If a producer can put five or six head of uniform steers in a group, why not get that $4 premium per hundredweight?”

This could lead producers to shorten breeding and calving seasons in order to build uniform groups.

In the study, steers received a $6-per-hundredweight premium over bulls. For a 500-pound calf, that's $30.

“So if producers sold bull calves, they're essentially paying someone $30 to castrate them. It's a chore, but it may be worth doing.”

Something else of interest was the frame scores. Large-frame and medium-frame cattle sold for the same price in 2005.

That wasn't true in 2000. That year, large-frame cattle sold for higher prices.

There are two reasons for the shift. This may be a signal from the industry to get cattle back to more moderate sizes. Also, feeder calf supplies in 2005 were very short and calves were in high demand. That means buyers may have been willing to pay the same for medium-frame cattle and large-frame cattle.

Meanwhile, small-frame cattle were discounted $22 per hundredweight.

“It's very important that producers know muscle thickness is a key factor in selling calves. Regardless of the calf's weight — 300 pounds or 700 pounds — muscle thickness highly determines price. That points to proper sire selection and culling cows that are light or flat muscled.”

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