Weekly Feeder Cattle Risk Management Analysis

January 19, 2011 04:21 PM


Weekly USDA feeder cattle prices for TX and OK were used to calculate projected breakevens on cattle bought last week, week ending January 14, 2011.  Breakevens were calculated for each weight group within sex (steer and heifer).  Ration price, $/ton dmb, was estimated at $320.  Other variables including interest, yardage and % feed financed were estimated to be 6%, $0.05/d and 100%; respectively.  As it is known that actual input estimates will vary greatly by region and by yard within region, our goal was to illustrate pricing differentials between weight classes and sexes of cattle. 

As it can be seen there are noticeable differences in the value of cattle across weight and sex groups.  Steers carry an initial premium when purchased, however; this same premium is not necessarily realized when cattle are sold on the fat market.  As such, heifers present an opportunity to take advantage of lower input costs; both on a $/cwt and $/hd basis, while achieving similar prices when sold as fats.  Projected profit does account for heifers posting poorer performance metrics when compared to steers, but at the end of the day their lower production is overstated in their initial price discount.  This is documented in the final column where projected profit is calculated and as all classes of cattle project to have negative returns, heifers are the less unprofitable when compared to their equivalent steer counterparts.

Justin Gleghorn is with Brock Thompson Trading, Amarillo, TX.

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