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Preconditioned calf premiums still look good

Oklahoma State University Ag Econ chart of premiums
Premiums paid in the Oklahoma Quality Beef Network sales last fall were still averaging above $10, a level surpassed by only the previous two years with record calf prices.
2016 fall sales in Oklahoma produce average premium of more than $10 per hundredweight.

Annual preconditioned calf premiums in Oklahoma suggest the value of these specially primed cattle is at least tracking alongside calf prices.

The average premium last fall for all the calves in the Oklahoma Quality Beef Network's nine sales was $10.22 per hundredweight, which is about a dollar less than in 2015, and more than the years preceding the market high in 2014. The comparisons are made with similar cattle, but without preconditioning, at the same sale barns around the same timeframes. The OQBN protocol is a fairly typical preconditioning protocol, which you can examine on the organization's website.

The preconditioning premiums for OQBN calves more or less follows the shape of the weekly feeder cattle price chart from the same timeframe, as you can see from the charts. This suggests the aforementioned relationship to calf prices.

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The shape of this feeder-cattle chart from 2009-2016 nearly mirrors the chart of OQBN preconditioned calf premiums.

The data includes classifications by weight class, although no clear trends are yet available over time, says Kellie Raper, Oklahoma State University agricultural economist.

"The first couple of years that we did extensive data collection, the weighted average premiums were relatively flat across weight groups," she says. "If you look at the six-year chart, you start to see some higher premiums (generally speaking) for lighter weight groups, which ... makes sense from a buyer’s perspective.

"Heifer premiums are a little more sporadic. If you look at premiums from a percent-of-price perspective as we did in some of our research, you essentially presume that lighter weights command higher premiums, just by the nature of the calculation, given the price slide."

Last fall, the lightest heifers earned the highest premium in weights from 300-600 pounds. True also for lighter steers from 300-500 pounds, with the exception of the 700-800 pound weight class earning a premium about the same as the average for the two light classes.

She adds than a potentially important factor in preconditioned calf sales may be larger lot sizes.

The average lot size for OQBN steers was 16, compared with seven steers average lot size in calves with no preconditioning. Calves with some level of weaning and/or preconditioning but uncertified were also included in the statistics and averaged 13 calves.

Further, she says, the average lot size for OQBN heifers was 15, compared with six heifers with no preconditioning and 11-head lots of heifers with some level of weaning and/or preconditioning but uncertified.

"Our research has indicated, as has other similar research, that marketing calves in larger, uniform lots results in higher price per cutweight, even at what many might consider to be small gains in lot size," Raper says.

The data from Oklahoma includes records pricing differences for several other traits, such as coat color, fleshiness, muscling and frame score. These are recorded for the preconditioned calves and the non-preconditioned calves; between the two groups, there were no large differences.

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