We seem to like history in the cattle business because we like comparative analysis—What did the market do last year? Or, five years ago? What was last year’s supply of fed cattle? If we didn’t have to deal with Mother Nature, feeder cattle and fed cattle marketing would be very predictable.
Feeder cattle markets have been on fire this summer. Feeder prices are firmly stronger than last year. The CME feeder cattle index was at $135.78 last year and this week it is at $142.62. Cattle feeders are losing money, yet they drive feeder cattle prices higher—what a deal.
This week marks the one-year anniversary of the Tyson Holcomb, KS, fire. Fed cattle prices were around $114 the week before the fire and the week after the fire they were at $105. Currently the fed cattle market is $106, a pretty dramatic drop when they killed even more cattle than the same week the year before. We all know that markets don’t like uncertainty.
We were watching the Superior Livestock and Western Video sales closely last week and the feeder cattle market is nothing short of remarkable. Cattle all around the country sold well. But these two sales held in Wyoming had a lot of local cattle sell; yearlings and weaned calves for fall delivery. You could see that trucking was an issue in some regions, but not much.
What always intrigues me about these video sales are the descriptions of the cattle. You can see all the value differences between lots. They sell unweaned calves to cattle with a ton of attributes. If you have spent much time watching, you quickly see what value different programs have. This is real price discovery.
For instance, cattle that are non-hormone-treated cattle (NHTC) is a big value point; no implants and no feed grade growth hormones, which would be how most calves are raised. And NHTC-verified cattle must sell through certified markets, so you can’t buy them just anywhere.
Then you have your source- and age-verified programs (SAV) which have been around for a while. It’s a third-party audit that simply tells the age, usually spring or fall calves and the location of the ranch or farming operation. Several outfits and breed associations do these programs.
The Global Animal Partnership program (GAP), created by Whole Foods stores, also helps add value. The program is easy to comply with, but requires that third-party audit.
Then there is Grass Fed or Organic audits and verification; feedstuff audits. These things all add a lot of value to your calves. Then, having your genetics verified through Top Dollar Angus or Angus Link can add value. Knowing the genetic makeup of your feeder cattle is important. Cattle feeders want performance and problem-free cattle. The seedstock industry devotes a lot of time and money to finding those premium genetics and documenting registered cattle. Eighty-three percent of the nation’s cattle are grading Choice and Prime.
You must use an electronic identification tag (EID), which cost a couple dollars to be involved with any of these programs. Adding value isn’t free. And keep in mind USDA is trying to move the bangs program to an EID tag for livestock disease traceability.
Beef Quality Assurance (BQA) is also an attribute that folks are adding to their cattle descriptions in sale catalogs. BQA is an easy thing to do and get certified. I’m not sure how much value it has in terms of dollars, but it gives folks a sense that your cattle have been raised right.
All these programs add value to your calves. Even a good weaning program with all the vaccinations and time add value. And the value difference is large. Most of these verified programs are easy to comply with and you’re probably already complying with many. But you need to have that third-party verification to get it done.
We’re seeing $20/cwt premiums on most of these program cattle. On a 500-lb. calf, it’s an extra $100 per head. The verification programs may cost you $3.50 per head and include the EID tag. Then there is a $750 annual fee to be enrolled in the source- and age-verification program with IMI Global. Additional value-added programs are a flat annual fee. On 100 calves it would be $10.50 per head to earn another $100 per calf. This is a good rate of return in my book. — Pete Crow, WLJ publisher
