With cattle inventory dipping, feeder calf prices have notably ascended, creating a buzz in ag news circles. Every week brings a declaration of price increments compared to the previous year, emphasizing the ongoing trends in farm news.
The current scenario sees 500- to 600-cwt feeder calves nearing a price tag of $300/cwt. Consequently, anticipating a gross revenue of $1,600 or more for feeder steer calves this fall seems plausible. As the cost of maintaining a cow escalates, cow-calf producers are left pondering whether retaining calves for feeding during a backgrounding or stocker period is a financially sound strategy to increase revenue in 2023.
Examining an annual cow cost of $1,250, a weaning rate of 90%, and a scale weight of 550 lb for a steer calf at sale time, the actual breakeven cost aligns at $252.25/cwt. This model proposes a margin of $47.50/cwt for a steer calf sold. Comparatively, feeder heifer calves offer a different picture, with the margin adjusting to $22.22/cwt, highlighting the greater profit potential for steer calves at weaning.
Deciding whether to background 2023's spring-born calves involves considering each operator’s unique production and financial situation. Immediate financial needs and cash flow will influence the ability to keep calves until 2024. If possible, operators might think about keeping the 2023 weaned calves for backgrounding and selling them in 2024.
Operators must assess their ability to care for and feed calves during winter. Retaining $1,600 calves is a significant investment with real risks. Proper facilities, water, and feed management are essential to prevent issues like illness and death, which would reduce the chances of earning extra revenue.
Before considering backgrounding calves, operators need to closely examine the financial aspects and the current high interest rates. Rising fuel and labor costs add to the total expense, affecting the decision to keep calves beyond weaning.
Retaining a $1,600 calf is tantamount to a significant financial investment, whether the capital is owned or borrowed. At 8.5% interest rates, the implications of carrying a $1,600 loan for six months translate to interest costs of $0.22/day. Operational and maintenance costs add to the daily expense, pushing the total daily expense to range between $2.25 and $2.70 during backgrounding in 2023 and 2024.
Projected prices for calves in November 2023 and March 2024 suggest gross margins of around $400 per calf, with breakeven costs at $130/cwt for steers and $160/cwt for heifers. This may lead operators to consider marketing steer calves and retaining feeder heifers for 2024 sales as yearlings.
Photo Credit: gettyimages-diane-kuhl
Categories: Nebraska, Livestock, Beef Cattle