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Online Tool Projects Fed Cattle Gross Margins
11/2/2009
Source: Iowa State University
Livestock economists working with the Iowa Beef Center and Iowa State University Extension have created a new tool to help cattle producers develop marketing strategy.
John Lawrence, Iowa Beef Center director, and Shane Ellis, ISU Extension livestock economist, spearheaded the development of the Cattle “Crush Margin” tool, now available online. This forecasting resource projects the gross margins of fed cattle that will be marketed over the next 16 months. The projections are based on futures prices and the historic Iowa basis for live cattle, feeder cattle and corn.
“During the past three years, livestock producers have faced dramatic volatility in the livestock and feed prices,” Ellis said. “This new resource emphasizes the importance of establishing a profitable gross margin rather than focusing only on maximized revenues.”
Using the projected gross margin as a barometer, it is possible to identify the opportunities when profitability could be secured with a hedge or other price risk management technique. Projections are updated online every Wednesday or more often if significant futures price fluctuations occur.
A similar decision making tool is also available for swine finishers. The crush margin tool and accompanying resources can be accessed through http://www.iowabeefcenter.org/margins.
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