is part of the Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

  • American Agriculturist
  • Beef Producer
  • Corn and Soybean Digest
  • Dakota Farmer
  • Delta Farm Press
  • Farm Futures
  • Farm Industry news
  • Indiana Prairie Farmer
  • Kansas Farmer
  • Michigan Farmer
  • Missouri Ruralist
  • Nebraska Farmer
  • Ohio Farmer
  • Prairie Farmer
  • Southeast Farm Press
  • Southwest Farm Press
  • The Farmer
  • Wallaces Farmer
  • Western Farm Press
  • Western Farmer Stockman
  • Wisconsin Agriculturist

Fine-tuning target sale dates can improve profits

It might help your ego to hear people say you are "ahead of your time," but it won't help your bottom line in the cattle business unless you are far enough out of step to capitalize on the herd behavior of everyone else.

After several decades of settled life and ranching in the last century, economists noticed that we tend to repeat the same cattle buying and selling habits over time. Such creatures of habit affect prices, in this case establishing a 10-year cattle cycle, complete with "seasonal" mini-cycles each year.

The combination of biology and psychology makes cattle cycles work. Traditionally, we produce more and more calves over a five- to six-year period, until the market sends us a "Dear John" letter (look for that to arrive in the form of declining calf prices in 2005). Then we spend four or five years getting over it by reducing herd size, which reduces the number of calves on the market.

Of course, supply and demand forces kick in and the scarcity sends prices higher. Feeling optimistic, we keep back more heifers, and as they start calving, the expansion phase arrives about three years after the first signs of price strength. And of course, this is the beginning of the end for another cattle cycle.

It doesn't have to be that way, if you plan ahead to take advantage of this cycle. If you've ever read herd management advice columns by Harlan Hughes, North Dakota State University, you know there's a better way.

Think about it: if you keep back heifers when they are worth the least amount (remember April 1996?), their calves will be knocking on the packinghouse door about the time the price trend heads higher.

A year later, those who didn't plan as far ahead will start to keep back heifers. A couple of years after that, they will want to buy bred heifers - maybe a few choice packages that you put together for just such an occasion.

Farms and ranches have a range of cow numbers they can run, balancing out with replacement heifers, feedlot yearlings or other custom cattle. Use that flexibility in your plan, not as a fallback when you can't afford to keep as many cows around.

If you gather herd, feedlot and carcass data on your cattle, you can cull and replace your way to a young herd of highly productive cows that will contribute a performance boost just when you need it most as prices begin their downward trend.

Discouraged with the genetic potential in your herd? Consider selling down to a choice few young cows in a year or two and running custom cattle on the rest of your grass while the cycle turns prices lower. You should have money to buy proven performance genetics and get back in for a brighter decade.

What about those seasonal price variations every year caused by seasonal variations in supply and demand? At first, it may seem that you have no choice, but give it a second thought. Do you have to sell 500-pound calves in October? Do you have to buy 500-pound grazing calves in the spring?

Consider going against tradition if your resources permit it. Fall, or even summer calving has been successful for some operations, producing calves that hit the market when supplies are relatively lower. Have you always wintered calves before feeding or grazing them in the spring and then feeding them in the fall?

A lot of producers have done that, resulting in seasonally lower prices for finished cattle in summer and some fall months. If you calve early enough to wean 500-pound calves in the fall, consider sending the bigger ones directly to a feedlot. The time value of money combined with beating the seasonal slump in fat cattle prices could give you a better shot at profit.

When you really get into fine-tuning target sale dates, think about the quality grade potential in your cattle. It does little good to aim for the high Choice market only to sell them when the seasonal Choice/Select spread is very narrow, such as typical in late winter months.

As more and more producers take steps to cash in with counter-cyclical and counter-seasonal strategies, price swings should become less severe, and the advantage of hitting some market dates could diminish. But that should mean less volatility in the market, which tends to be easier to plan around anyway.

A continuing rise in the price of propane could drive up grain drying prices at elevators around the Midwest, a University of Missouri agricultural engineer said.

"The farmers should know what sort of increase they're going to be charged for drying costs at the elevator," said Bill Casady of the MU Commercial Agriculture Program.

"The producers should know how much the price of propane drives the elevator's drying cost. They can compare that with the on-farm drying costs and make an informed decision."

The cost of heating fuel is as much as 95 percent of the energy cost for grain drying, Casady said, with the electricity to run fans making up the other 5 percent. "If propane prices are a third higher this year than last year, the energy costs for drying will also tend to be about a third higher."

Heated-air drying allows producers to harvest in a timely manner and reduce potential losses from cumulative causes or catastrophic weather. But farmers concerned about drying costs should consider field drying, Casady said.

"Field drying is a valuable way to dry their crops. You don't pay anything, but you incur losses in the increase in dropped ears, or the risk of losing it to a storm by having it sit out there." A middle course could be combination drying, which uses heated air to dry the grain partially, followed by aeration, to significantly reduce reliance on propane, he said.

Casady believes drying charges will not increase significantly. "Energy costs are only a portion of the total drying charge on wet grain," he said.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.