February 20, 2004
Calf marketing options
By Lana Robinson
Obviously, small cow/calf operators wanting the advantages larger ones get when they market calves can't compete on a numerical basis. But Ron Gill, Extension livestock specialist, suggests small producers do have some options available that can help them fetch more for their calves.
"Most of you would like to have the advantage of the larger producer, but that's not going to happen," Gill told a group of cattlemen attending the 42nd annual B.I.G. (Blackland Income Growth) Conference in Waco last month. "If you're marketing fewer than 100 head at one time, your options are limited. Why? A hundred head is truck weight. Under 50,000 lbs., they're going to discount you on cattle because it's not a full truckload. How, as a small operator, do we get a full truckload? Work on commingled sales with neighbors."
Individual operators, or those pooling their calves with neighbors, should keep in mind that most cattle feeders prefer to purchase groups of 40 or more preconditioned calves separated by sex, breed, and weight. Gill said the major hindrance to the commingled concept is producer independence.
"Producer cooperation is the hold up. We want access, but are not willing to cooperate," he observed.
Another problem over which producers, alone, have control, is the ability to produce a sizeable lot of calves of the same size, Gill noted. Uniform sale groups require tight breeding and calving seasons (all within 60 days).
"Until you get a very controlled breeding season, you will not have the uniformity that feedlots look for," he pointed out.
The most common venue for the small cow/calf operator is the local sale barn, which offers some advantages cited by Gill: 1) All producers have access to competitive bids; 2) The producer doesn't have to study the market; 3) Markets are available about 50 weeks out of the year; 4) Sale barns provide opportunities for "special consignment" sales; and 5) Uniformity in calves is not important.
"It still needs to be an acceptable calf for the market. Be sure to produce the type of calves that are in demand by the buyers," said Gill.
Gill said country sales, involving truckload lots, are less common, but a good option.
"The sale barn knows all the cattle buyers and can arrange buyers for truckload lots," he said.
Gill recommends calling an auction barn at least two weeks ahead of time, to reserve a pen size spot for the calves, and to increase chances for better prices.
"Work with the auction barn. Call ahead and let them know that you are going to bring in a little group of calves. That way, they can get outside buyers competing with order buyers. You'll get higher prices. They work off commissions, so it's to their advantage," he said.
Private treaty tips
Private treaty is another popular option for small cow/calf operators. That can include home cash sales (single, group), forward contracting, commingled cattle, and marketing into alliances. Gill's advice for success: 1) Know your buyers; 2) Study market summaries; 3) Be flexible in your management practices; 4) Price your calves; then price your services; 5) Know what price you are willing to accept; and 5) Be realistic.
"One way to price cattle is to study market reports. You can price them at the top, but be willing to negotiate. Determine your bottom price. The best sources for price is the weekly average price, Texas weighted average and Oklahoma weighted average," the livestock specialist said.
"Cattle with a heavy Brahman influencethey are not going to bring top of the market prices."
Satellite/Internet auctions, said Gill, give the greatest access to the largest pool of buyers available. An advantage is that calves will not have to leave the farm to be offered for sale. And this marketing strategy provides for the sale of truckload lots.
"Know what you are willing to take. You have two minutes to P. O. Be sure you consign early enough to fulfill the requirements of the contract on weaning, vaccinations, etc.," he said.
Retained ownership explained
Retained ownership is another marketing option noted by Gill. Retaining ownership of the calves from the cow-calf herd and either feeding the calves on-farm or having the calves "custom fed" at a growing or finishing operation may be advantageous for the small producer. Retaining ownership provides an opportunity for the herd owner to profit both from the cow-calf operation and from the finishing enterprise.
A cow-calf producer may retain ownership by partnering with a feedlot. A partnership arrangement can provide for the cash flow need of the cow/calf operation.
"This is typically truckloads200 to 400 head lots. It allows you to participate in the post-weaning performance and quality of cattle. The downside is that producers are also subject to post- market fluctuations," he said.
Gill offered several tips to the producer intending to go the partnership or retained ownership route.
"Run budget projections with realistic and complete numbers prior to entering into a retained ownership program," he said. "Also, have some knowledge of the expected performanceboth growth and carcass characteristics. Finally, don't over-estimate the quality of your calves."
To prepare calves for retained ownership, he suggests following the VAC 45, at a minimum.
"I hear a lot of producers say they don't know how to precondition calves. If you keep replacement heifers, you precondition. If you can do it for heifers, you can do the same thing for steers," he said.
Marketing into an alliance is another option, which can increase revenues through vertical affiliations, he said. Some industry observers are thinking this may be a route to a more financially stable ranching operation.
Breed vs. Type
Gill spent part of his time distinguishing between "breed" and "type." He said no one breed maximizes or optimizes the "three Ms"maternal, muscle, and marble traits.
"Type is what we're looking for," he said. "Is there an ideal breed? Well, some say half English/half continental is. If you're going for yield and grade, an optimized product for a grid, you'd probably want to stack more to the English."
Gill said cattle that are 25 percent English x 25 percent Zebu (Brahman influenced) x 50 percent Continental (Charolais, Simmental, Limousin, Gelvieh, Chianina, Maine Anjou, etc.) will make the 15 percent choice grade, but that is not good enough to sell in a grid situation.
"Right now, the largest buyer is not buying any of these. Forty percent choice is required," he advised.
Ideally, he said, the type cattle most marketable for the small producer should have a composition of a minimum of 25 percent English, a maximum of 50 percent Continental and a maximum of 25 percent Zebu.
"Extremes of any kind are generally less valuable," he said.
Finally, Gill said the biggest loss cow/calf producers face is shrink loss, which can run 6 to 10 percent if unmanaged. According to Gill, this is where producers most often fall down on the job.
"What you want to do is teach them to eat feed, either creep or hay. Get the calves accustomed to people and corrals. You should wean them 45 days prior to sale, if possible, and if it's economical," Gill said. "Also, you will have less shrink on calves hauled two days prior to the sale than if you haul them the day of the sale. And don't fill cattle. That never works."