Evaluate Your Options When Thinking about Marketing this Year's Calf Crop

July 2014

With a recent adjustment to the downside, prices for all classes of cattle have taken off like a rocket over the last several weeks. These prices at never seen (nor dreamed of) before levels are causing many cow-calf producers to evaluate how they should market this year's calf crop. In addition to higher prices, excellent spring and early summer moisture in many parts of Nebraska and the Northern Great Plains has resulted in great grass production. This grass and the hay that is being made from it will provide an abundance of fall and winter forage.

This scenario is prompting many cow-calf producers to ask "Should I keep my calves, sell them or use something to protect these prices?". The following are tools and things to consider when evaluating the options.

Written Marketing Plan

Have a written marketing plan that you have discussed with other business team members and adjusted based on today's current market prices. A written marketing plan and communicating it with team members can provide needed accountability to act on it.

Risk Management Tools

Look at the various risk management tools available and see which ones may help you reach your goals as part of your marketing plan. Things like forward contracting, futures and options, and Livestock Risk Protection Insurance are all devices that can be used. In today's market environment, tools that allow producers to protect against a price move down while leaving the upside open may be attractive. A webinar explaining Livestock Risk Protection Insurance and how it can be used in a risk management plan is available.

Unit Cost of Production

Know your Unit Cost of Production (UCOP). Input costs have increased rapidly in recent years. Knowing what it costs you to produce a pound of weaned calf or to put a pound of gain on a stocker or a yearling is critical when evaluating marketing options. Many producers are surprised at what it costs to produce a pound of weaned calf today with current input costs. A webinar explaining Cow Costs and Unit Cost of Production and how to use this information in available.

Current Value vs. Projected Value

Spend some time looking at the current value of weight gain on calves as well as projected value of gain at today's market prices. Breaking this value of gain down into 50 or 100 pound increments can be instructive. Comparing the value of a pound of gain to what it costs to put on a pound of gain can bring clarity as to whether or not retained ownership is likely to be profitable.

Summary

Cow-calf producers are familiar with dealing with price volatility. Decision making with current and projected prices that could bring a season of prosperity is almost paralyzing for some. Evaluate the opportunities, develop and execute a plan and then enjoy these times of excellent prices.

Aaron Berger
Extension Educator
Panhandle Research & Extension Center
University of Nebraska