Selling or Buying Feeder Cattle

January 28, 2009

In Brief

Selling or buying feeder cattle privately can be stressful and confusing.  How is the price determined?  Is the price on a sliding scale?  Will the seller be giving any shrink?  These questions and more all need to be addressed before a deal is made and cattle change hands. 

In Detail

Taking your feeder cattle to an auction is easy.  A price is made by open outcry, a check is written, and you have money in the bank, all in the same day. 

            Using an auction barn is not without cost, though.  Cattle have to be trucked to the barn.  Cattle will have a weight shrink of 3-5 %.  You will be charged a commission.  The cattle may pick up a disease from the stress and the commingling with other cattle.

We use both public auctions and private sales to sell our cattle.  I will detail how we sell our feeder steers privately, usually in early winter.

            We usually have one or more parties interested in our feeder steers.  We never play one party off of another.  Instead, we give first chance at our steers to the party with the most seniority in buying our steers. 

We talk and tell them how big the group is.  We decide about when we would like to have the cattle change hands.  We are flexible and always willing to work with our buyer.

Next, we have to come together on price.  We estimate our steers’ weight to know what weight range to look at for prices.  Since we sell about the same time every year our weight stays fairly consistent, (550-650 lbs.).  We will look at prices in some of the national papers and on the internet to get a ballpark idea.  Next my father and I will attend the best feeder calf auction in our area to find our local market.  Last year we attended the auction with the farmer who was interested in our steers.  We watch the auction for groups of steers that are similar to ours and write them down. 

This is what they would look like and how they would be described:

5 or more head

550-650 lbs.

Knife cut, (castrated)

No implants

Weaned for a month or more

Bunk broke

Double vaccinations

Wormed

Solid colored, (red or black)

Polled

Good hair coat

Medium framed

Thick, good-doing

            We write down a description, the number of head, the average weight, and the price.  This is what we found in December, 2008:

Head    Avg. lbs.           Price/cwt.

10        622                  99.50

20        618                  98.50

5          621                  92

22        580                  101

10        592                  96.50

12        548                  100

7          637                  93.50

6          573                  95

7          591                  95

16        543                  100

 

Avg.     593                  97

So it looks like good, 600 lbs. steers are bringing about $97 per hundred lbs.  We could establish this as our price, but we don’t know exactly what our steers will weigh.  Almost always, price declines as weight increases.  So the fairest way to price cattle is with a sliding scale. 

A good rule of thumb is a $10 change in price for every 100 lbs., so $5 for every 50 lbs.  So if 600 lbs. is $97, 550 lbs. is $1.02, and 650 lbs. is $92. But when we look at the data, it appears that $10 is too much of a slide.  It looks like an $8 change per 100 lbs. would be more appropriate.  So 550 lbs is $1.01 and 650 is $93.  If we sold our steers in this sale, this is our best estimate of the price they would bring.

But this isn’t the price we quote to our buyer.  We figure an auction costs us close to $5 per hundred lbs. from increased shrink, commission, and trucking costs.  To be fair to our buyer we reduce our price by $3 per hundred lbs.  So the price we quoted was $94 at 600 lbs. with an $8 slide.  We talk to the farmer who buys our steers and he usually says ok.  The farmer is very easy-going but I’m sure he knows what cattle are selling for and he would know if our price was out of line.

Other details of the sale include a 2% shrink.  This is standard for privately sold cattle and is fair as cattle lose weight when they are transported.

Trucking is usually the responsibility of the buyer when cattle are privately sold.  We helped our buyer haul our steers because he couldn’t fit them all on his trailer. 

Now let’s see what actually happens on sale day.  We call FS which has a certified scale and let them know we will be weighing cattle.  Since we buy from them they don’t charge us for this service.

We meet our buyer at the scales and each of us weigh our truck and trailer empty.  We drive back to the farm, load 10 head on each trailer then drive back to the scale, weigh, then drive to his farm and unload the cattle.  We then repeated this as we had 40 head to sell.

Now we take the scales tickets and total the weight:  23,920 lbs.  

Next, we take off 2% shrink.  Multiply .02 times 23,920 equals 478.4 lbs. 

Subtract 478 from 23,920 equals 23,442 lbs. which is our adjusted weight.

Divide 23,442 by 40 steers equals 586 lbs. average weight.  We will use this weight to determine our price based on the $8 sliding scale per hundred lbs.

Subtract 586 lbs. from 600 lbs., which is our base line weight, equals 14 lbs.

Multiply 14 lbs. times .08 which represents our sliding scale, equals 1.12 which is the dollars our base price needs to be adjusted.

Since our steers weighed less than 600 lbs. we need to add $1.12 to $94 equals $95.12

This is our new price based on a 586 lb. avg. weight.

Lastly, multiply $.9512 times the adjusted total weight, 23,442 equals $22,298 total dollars for the 40 steers.

            Since we only do this once or twice a year it’s good to practice beforehand to get the rust off the brain.

            Our heifers are sold differently.  Most are sold as breeding heifers so we set a flat price such as $700 per head.  Buyers get choice after we pick our replacements so it benefits the buyer to choose early.  After the heifers are picked over we support our local auction barn by selling the rest there.

            Although many cattle are sold privately for good reasons, the auction barns are very valuable to our industry.  They offer real price discovery, unite sellers with buyers, and enable producers to see how their cattle compare to others.

 

 

 

 

 

 

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Hog Feed is as Dear as Gold Dust

January 26, 2009

In Brief

In 2008 we held our whole herd feed efficiency constant while taking our hogs to heavier market weights for our expanded direct market business.  However, the higher price of soybean meal and premix resulted in our highest feed price and highest cost of production ever.

 

In Detail

            Several years ago we purchased a scale for our feed mix/mill.  This allowed us to formulate more accurate rations.  It also enabled us to get an accurate accounting of feed used.  This statistic, when divided by lbs. of pork produced gives us one of the most important measures of productivity:  Whole herd feed efficiency.  As you will see by the following data we have been remarkably consistent.

            Avg. market weight       Pork produced             Feed used        Feed efficiency

2006    280 lbs.                        278,034 lbs.                 1,125,100 lbs.  4.05 lbs.feed/lb. gain

2007    279 lbs.                        258,397 lbs.                 1,043,200 lbs. 4.04 lbs.feed/lb. gain

2008    290 lbs.                        248,494 lbs.                 1,006,800 lbs. 4.05 lbs.feed/lb. gain

 

            When we look at the price of feed a different picture emerges.  Market fluctuations have resulted in a roller-coaster ride.  Thankfully, we raise our own corn and oats and the price I use for these commodities is our cost of production.  Corn is priced at $.04 per lb. which is $2.24 per bushel.  Oats are $.06 per lb. which is $1.92 per 32 lb. bushel.  When oats are available and corn is scarce, oats are substituted for corn on a pound for pound basis at up to 20% of the ration.  We notice no reduction in gain at this level.  Oats are also included in the gestation ration most of the year.

Soybean meal, (SBM), has fluctuated greatly, especially in 2008.  When SBM approached $400 per ton, (.20 per lb.), we looked at ways to reduce our use.  Our salesman from JBS United, (Carl Walter, phone: 608 845 3344), helped us formulate rations with added lysine and threonine which are the first and second limiting amino acids in a corn/soy diet for swine.  Consequently, we used less of the expensive SBM.  SBM, as well as the rest of the markets came down dramatically this fall.  For these two reasons our price for SBM was actually the same for both 2007 and 2008 at $.18 per lb.

The amount and price of the vitamin/mineral/amino acid premix used from JBS United is where we see the greatest change.  There are probably a few reasons for this.  First, the price of everything was up in 2008 and premix was no exception.  Second, we added extra amino acids so we could cut down on the SBM.  And third, we started using a special order premix with no animal products to meet the demands of our direct market.

2007 Feed

Type                Amount            Price/lb.            Dollars

Corn                807,265 lbs.     $.04                 $32,290

Oats                   20,500 lbs.     $.06                 $  1,230

SBM                181,935 lbs.     $.18                 $32,748

Premix                33,500 lbs.     $.40                 $13,400

 

Total              1,043,200 lbs.    $.076               $79,668

 

 

2008 Feed

Type                Amount            Price/lb.            Dollars

Corn                774,775 lbs.     $.04                 $30,991

Oats                   34,850 lbs.     $.06                 $  2,091

SBM                159,545 lbs.     $.18                 $29,068

Premix                37,630 lbs.     $.55                 $20,796

 

Total              1,006,800 lbs.    $.082               $82,946

 

            Now we have everything we need to figure out our cost of feed per lb. of pork produced.  Multiply the whole herd feed efficiency, (4.05), by the average price per lb. of feed, ($.082), which gives us a feed cost per lb. of  pork of $.33.  We received $.40 for the first load of hogs we sold to Tyson in January, 2009.

            The overall average price per pound is up $.006, ($.082 – $.076).  This doesn’t seem like much, but on 1,000,000 lbs. of feed its $6,000.  Six thousand dollars out of my pocket.  Not good.  Lets me know, though, where I need to watch in 2009.  Check out my next post to see my feed budget for 2009.

            Some of you economist types are saying I should be pricing my corn at market price.  Ok, let’s do worst-case scenario for fun.  Let’s say for some reason we purchased all of our corn last summer at the market peak of $7 per bushel.  That gives us a price per lb. of $.125 for corn.  Multiply that times the lbs. of corn, (774,775lbs.), equals $96,847.  Add that with the oats, SBM, and premix equals $148,802.  Divide that by the total lbs. of feed, (1,006,800), and we have an average cost of feed of $.148.  Now multiply that by whole herd feed efficiency, (4.05), and we have an astounding feed cost per lb. of pork of $.60.  Last summer, we actually sold a few loads to Tyson over $.60 with a peak of $.66.  But for most of the year we would have lost our shirt. 

            My Dad was telling a joke last summer.  He said he needed to get his mix/mill fixed.  People would ask why.  He would say that he used to put in $2 corn, feed it to hogs, and get $3 for it.  Now he’s putting in $5 corn, feeding it to hogs, and getting $3 for it.  That’s a good example of Walter humor.

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How I Became a Swine Seedstock Supplier

January 26, 2009

In Brief

Numerous, monumental failures followed by modest success.

In Detail

I was exposed to hog shows at an early age. I remember hearing people talk about the “barrel” show and wondering why people would show “barrels”. It took me a few years to realize “barrow” was what they were actually saying. Barrow is a castrated male hog in case you don’t know.

Before I was old enough to show hogs, (10 years), my cousin and I would pretend to show hogs. One of us would get on his hands and knees and the other one would walk him around the living room floor. Its no wonder then that the first year I was able to actually show a hog I won showmanship.

I was also interested in the genetic aspect of swine. My Dad would give his old purebred journals to me. My cousin and I would go through the magazines such as “The Spotted News” and alternately divvy up the boars and gilts pictured in the breeder’s ads. We would cut out the picture of the hog we wanted and add it to our “herd” in a cigar box.

My favorite breed was the black and white belted Hampshire. I would wait anxiously for the breed’s magazine, “The Hampshire Herdsman”, to arrive. Then I would read and reread, getting a sense of who had the prominent boars in the breed and what direction, genetically speaking, the breed was going. The biggest issue every year was the July Herdsire edition. I remember taking that to school on a day when we had all-day standardized testing. I would rush through my tests and then pull it out and start reading. My teachers questioned this practice, but didn’t stop me. It was probably too weird for them to object.

It wasn’t long after starting to show my Dad’s crossbred hogs that I realized I wanted hogs of my own. And I wanted a purebred Hampshire. My parents and I went to an auction held by a prominent Wisconsin breeder. This was about 1983 and I was 13 years old. I did my own bidding and bought a purebred Hampshire gilt for $300. That was a lot of money back then and most of my savings. The auctioneer stopped the sale and said when he was my age he bought a motorcycle and he wished he would have bought a Hampshire gilt. Well I wished I would have bought a motorcycle. We took that gilt home and turned her in with our Hampshire boar and she wouldn’t breed. We even tried other boars. All she did was get fat. Well the gilt was sold as a breeding gilt so I could have gotten a refund or a replacement but I was too shy to ask for it and I guess my Dad was too. We took the gilt to market and I took a huge loss.

In a couple of years I had saved up enough money to try again. This time I decided to try my second favorite breed, the Duroc. And I was also determined to buy two. It seems like bad luck to buy one animal on our farm. So I went to a prominent Wisconsin Duroc breeder and bought two purebred Duroc bred gilts and a purebred Duroc boar. I wasn’t going to mess around with trying to get them bred this time. Well they came along pretty nice but about a week before they were supposed to farrow, one had several dead piglets and the other had 4 weak, live piglets and some more dead piglets. The one gilt managed to save her 4 piglets. But they were never very good. When I tried to breed the gilts to the Duroc boar I realized the boar was a non-breeder. Again, my attempt to establish a purebred herd of swine was thwarted.

All this time I continued to show my Dad’s hogs. These hogs were good, profitable, hogs. But they were not blue ribbon winners. So I decided to try to improve the genetics of this large herd.

I scoured the breed magazines looking for a herd with genetics that stood out. At this time in the 80’s most purebred breeders had decided to select hogs that were more stout made. This resulted in short, fat, light-muscled hogs. I found a Hampshire breeder in Iowa, though, that had not gone with this fad. He continued to raise lean, muscular hogs. I asked Dad if we could get a couple of boars from this herd and he agreed. We did, and they were everything we hoped they would be. We started improving our swine herd. Every other year we would go back and buy more boars. I never won our county swine show. But by the 90’s, when I was too old to show, my sisters were getting blue ribbons and winning the show regularly.

In the 90’s, corporate hog buyers decided that the majority of hogs were too fat and they were going to give an incentive for farmers to raise leaner hogs. They devised a system, (grade and yield), whereby hogs were individually measured for quality and paid accordingly. Farmers could see they needed to improve their hogs rapidly if they were to remain competitive. So, many of them decided to buy improved boars and improved gilts rather than wait for the slower genetic change if they had just used improved boars.

Local farmers could see for themselves that we had improved hogs and began to ask to buy our gilts. So, in the early 90’s we sold over 200 gilts per year at a $50 premium over market price. I could see monetary benefit from having improved genetics.

But I still wanted my own purebred herd. So, when I was in college at Iowa State I contacted a prominent Hampshire breeder from Nebraska. He sold me 4 purebred gilts for $400 each. I bred them to one of our boars and was surprised when one of the litters produced a genetic anomaly.

In many mammals, including people and swine, the males of the species undergo a peculiar process in embryonic development. The testes, which begin in the abdominal cavity, descend through the inguinal canal if all goes normally. If the opening is too big, the intestines will also come through the hole and you will have a hernia, which we call a rupture in swine. If the opening is too small, the teste will not be able to descend through the canal and it will appear to be absent. We call this a cryptorchid in swine.

Now I always thought these two conditions were on opposite ends of the genetic spectrum. So, imagine my surprise when each of these conditions was present in two different boars in the same litter. I had purchased a genetic mine field. Evaluation of their offspring also determined they weren’t nearly as good as my Dad’s herd. So, after a couple of years I terminated this herd.

In my last year of college I knew I wanted to come home to the farm and raise and sell boars. One of my college buddies had the inside scoop on an excellent purebred herd in Indiana. They raised Yorkshires and Landrace which were white breeds I hadn’t tried yet. Through my friend’s help I purchased two Yorkshire boars and four Landrace gilts. The white breeds are known for being more maternally productive and these proved true to form.

This was August, 1994. I had also seen enough in the industry to know that Artifical Insemination, (AI), was the future. I informed my father that we would no longer be buying boars but would instead introduce new genetics through purchased boar semen. He was skeptical, but it worked. We have stuck with this program and it has helped us keep our swine herd health very stable. We have never had any of the major hog diseases such as Psuedorabies, PRRS, or Circcovirus.

I had assembled some excellent hogs and had access to excellent genetics through AI. I wanted to use the four major breeds because I felt each offered something. The white breeds, Yorkshire and Landrace were superior maternally. The colored breeds, Duroc and Hampshire were superior for meat and gain and added durability for outdoor production. But how could I use these genetics to produce boars that Wisconsin producers needed?

I asked my dad for advice. He said to cross a colored breed with a white breed and sell the resulting offspring. Like all great ideas it had to go through a process. First, I ridiculed the idea. This is just not done in the industry. Second, I thought others would ridicule us. Third, I realized it was a great idea and would work beautifully.

My seedstock business is called Oak Grove Swine. I began to sell Oak Grove Red boars, (Duroc-Landrace), and Oak Grove Blue boars, (Hampshire-Yorkshire). Farmers would buy a Red boar one year, then buy a Blue boar the next year to breed to the Red boar’s offspring. This program could go on forever. It was very simple, yet utilized the hybrid vigor from four breeds. Plus, the durability of the colored breeds was balanced with the maternal abilities of the white breeds.

I began to sell 40 – 50 boars a year from 1995 on. If each boar sired 250 hogs, Oak Grove genetics were a part of maybe 150,000 hogs in the last 14 years. I achieved my boyhood dream of becoming a swine seedstock supplier.

What’s next for Oak Grove Swine? I will detail my vision for the future in a post to come soon.

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2009 Hog Feed Budget

January 25, 2009

In Brief

           

Hog feed is the most expensive at weaning.  As hogs grow, they require less protein and consequently, less expensive rations.  I have developed a feed budget so as to not overfeed an expensive ration. 

Following, is my feed budget with January, 2009 prices.  The soybean meal, (SBM), is from Kieler Feed, phone: 608 568 7707.  The premix is from JBS United, (Carl Walter, phone: 608 845 3344).  The premix is called Grand Prairie and is formulated especially for producers who desire to not feed antibiotics or animal products to their swine. The corn is priced at our cost of production, ($2.24 per bushel or $.04 per lb.).

 

In Detail

 

Type                lbs. of feed       price/lb.            dollars

Starter              500 lbs.           $.766               $383

SBM                500 lbs.           $.165               $ 83

Corn                1000 lbs.          $.04                 $ 40

 

Total                2000 lbs.          $.253               $506

Estimated hog weight: 10 to 20 lbs.

Feed budget: 10 lbs. per hog    

 

Grow 1            250 lbs.           $.723               $181

SBM                500 lbs.           $.165               $ 83

Corn                1250 lbs.          $.04                 $ 50

 

Total                2000 lbs.          $.157               $314

Estimated hog weight: 20 to 30 lbs.

Feed budget: 20 lbs. per hog

 

Grow 1             125 lbs.          $.723               $ 90

40 L                     25 lbs.          $.445               $ 11

SBM                 500 lbs.          $.165               $ 83

Corn                1350 lbs.          $.04                 $ 54

 

Total                2000 lbs.          $.12                 $238

Estimated hog weight: 30 to 60 lbs.

Feed budget: 60 lbs. per hog

 

40 L                     50 lbs.          $.445               $ 22

SBM                  600 lbs.          $.165               $ 99

Corn                1350 lbs.          $.04                 $ 54

 

Total                2000 lbs.          $.088               $175

Crude protein: 20.25%

Estimated hog weight: 60 to 80 lbs.

Feed budget: 60 lbs. per hog

 

 

40 L                     50 lbs.          $.445               $ 22

SBM                  500 lbs.          $.165               $ 83

Corn                1450 lbs.          $.04                 $ 58

 

Total                2000 lbs.          $.082               $163

Crude protein: 18.25%

Estimated hog weight: 80 to 120 lbs.

Feed budget: 120 lbs. per hog

 

40 L                     50 lbs.          $.445               $ 22

SBM                  400 lbs.          $.165               $ 66

Corn                1550 lbs.          $.04                 $ 62

 

Total                2000 lbs.          $.075               $150

Crude protein: 16.25%

Estimated hog weight: 120 to 160 lbs.

Feed budget: 120 lbs. per hog

 

40 L                     40 lbs.          $.445               $ 18

SBM                  350 lbs.          $.165               $ 58

Corn                1610 lbs.          $.04                 $ 64

 

Total                2000 lbs.          $.07                 $140

Crude protein: 15.25%

Estimated hog weight: 160 to 200 lbs.

Feed budget: 120 lbs. per hog

 

40 L                     40 lbs.          $.445               $ 18

SBM                  300 lbs.          $.165               $ 50

Corn                1660 lbs.          $.04                 $ 66

 

Total                2000 lbs.          $.067               $134

Crude protein: 14.25%

Estimated hog weight: 200 to 240 lbs.

Feed budget: 120 lbs. per hog

 

40 L                     40 lbs.          $.445               $ 18

SBM                  250 lbs.          $.165               $ 41

Corn                1710 lbs.          $.04                 $ 68

 

Total                2000 lbs.          $.064               $127

Crude protein:  13.25%

Estimated hog weight: 240 lbs. to market

Feed budget: until market

 

            I will also include the rations for our breeding stock.

 

Sow 80               80 lbs.          $.653               $ 52

SBM                  250 lbs.          $.165               $ 41

Corn                1670 lbs.          $.04                 $ 67

 

Total                2000 lbs.          $.08                 $160

Gestation ration:  for breeding sows and boars.

Note:  this is also my layer ration for my hens.

 

Sow 80                80 lbs.          $.653               $ 52

SBM                  540 lbs.          $.165               $ 89

Corn                1380 lbs.          $.04                 $ 55

 

Total                2000 lbs.          $.098               $196

Lactation ration:  for lactating sows.

Note:  this is also my starter ration for baby chicks until 8-10 weeks of age.

 

            It is relatively easy for us to use this feed budget.  We farrow in groups and each group is then reared together in a hoop building.  We simply count the pigs and then multiply the number of pigs by the feed per pig and round to the nearest ton of feed.  For example:  150 pigs budgeted to receive 120 lbs. of a ration would equal 18,000 lbs. or 9 ton of feed.  Each batch of feed is recorded in a notebook so we can keep track of feed usage. 

 

 

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