Have You Made Your Marketing Plans for the Fall?
If you're a cow-calf producer and your spring calves are grazing with their mothers, there is no time like the present to begin making plans for how you are going to market those calves this fall. If you begin to make plans now, maybe you can resist the temptation to decide on some Sunday night this fall to sell your calves on Monday morning at the local sale barn.
By planning ahead, you should be able to make a more logical decision about what to do with those calves. The first factor you should address is your cost of production. This cost of production will give you a minimal pricing structure for your calves. Also, it is a factor that you have control over as you monitor expenses through your management decisions.
Secondly, you should consider the external factors. Two major market factors that influence calf prices are the price of corn and fed cattle prices. You should remember that from 1996 to this spring, these factors dramatically affected the market.
Although we are looking at a large fed cattle supply and lower fed prices through the summer, by mid-summer we should have feeder cattle and calf supplies dramatically below year-ago levels. These lower available supplies should result in lighter placements and therefore lower fourth-quarter fed supplies.
Based on present supply projections, fed prices are expected to average in the mid to upper $60s through the fourth quarter (as reported by Cattle Fax). As we found out last year, the quantity of the corn crop has a direct bearing on the price received for calves. At the present time, indications are that more acres of corn will be planted in 1997 than in 1996.
With a little help from mother nature, we should have a chance to exceed a nine billion bushel crop. With a corn crop of this size, we should looking at corn prices in the $2.25 to $2.50 range. Based on $65 fed cattle and a nine billion bushel corn crop, the average calf price for this fall should be in the low $80s.
What does all this tell you? You need to monitor current corn crop conditions and be prepared to evaluate the different marketing options. Assuming that these projections are correct, you need to know if her $80 calves will provide you with a profit margin sufficient to meet your needs. If you would like to discuss you marketing plans, please me give a call.