A Flexible Marketing Approach Can Pay Off
A common theme I hear from cattle feeders of all sizes and geographies is “marketing flexibility” represents a growing part of their feeder cattle buying strategy. The ability to role with the punches and adapt to volatility in markets, environments, labor and other hard-to-control variables is essential. Any level of additional precision that can be added to this process has value. Feeder cattle that provide options or the flexibility to navigate fields laden with “risk land mines” are far more appealing than those that can’t.
Sometimes, the slightest of differences between groups of feeder cattle can significantly affect their value when sold as fats. Buying the right cattle that best fit all the dynamics that will affect their value at time of harvest, such as spreads in the futures markets and the values of Choice or higher quality beef carcasses are very important. Understanding these subtle nuances can help you more effectively market your future calf crops.
Factors such as calving dates and length of calving period can affect value more than you realize. There is substantial value differentiation between a steer weighing 700 lb. by Nov. 1 versus one that will weigh 700 lb. a month later. If you calve in a time frame that makes it tough for your feeders to finish and harvest on the April live cattle board, which is currently worth about $9 per cwt more, they will be worth less than identical cattle that will.
Fat cattle that will be sold and harvested during that prime April period have historically benefited from large spreads in both the live cattle markets and the available premiums for higher quality carcasses. That extra value filters back down to the ranch through true demand-driven pricing.
The real value of cattle with marketing flexibility comes into effect with those that sell outside of the April window. To demand a better price, steers or heifers must offer the extra layers of versatility needed when selling as finished cattle during periods of tight spreads. Narrow margins drive the need for flexibility. Having options to secure some profit, or minimize a loss is very important.
You might assume all cattle with potential genetic advantages for marbling and yield get funneled toward carcass premium grids. In many cases, that does tend to be true; however, groups of cattle that have the ability to capture carcass premiums might be sold live rather than on a grid when market conditions dictate that as the best strategy. When the packer’s live bid locks in or secures a solid profit, cattle feeders will evaluate the risk reward equation for selling on a grid versus live. This is precisely why cattle that grow and grade are more desirable. They provide more flexibility as well as opportunity for profit.
The market channel that offers the greatest opportunity at time of harvest might not have been the initial strategy the cattle were bought and slotted for. The more versatile your cattle can be with regard to merchandising options at that time, the greater the value they will potentially demand. This makes understanding the importance of those traits related to profitable cattle feeding and genetic selection tools more important than ever.
