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Finding Profitability

Finding Profitability. Through Backgrounding or Finishing. Calf Pricing. Decision Process Cow Calf Backgrounding Finishing Basis Charts and BeefBasis.com Seasonality. Basis. Basis = Cash Price - Futures Price If Cash = $120 and Futures = $110 Basis =

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Finding Profitability

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  1. Finding Profitability Through Backgroundingor Finishing

  2. Calf Pricing • Decision Process • Cow Calf • Backgrounding • Finishing • Basis Charts and BeefBasis.com • Seasonality

  3. Basis Basis = Cash Price - Futures Price If Cash = $120 and Futures = $110 Basis = • Estimated basis is a forecast based on history.

  4. September Feeder Cattle

  5. October Feeder Cattle

  6. November Feeder Cattle

  7. July Fed Cattle

  8. A Marketing Plan A marketing plan should address: • short term survival • long term success • key elements • map to destination

  9. Key Elements of a Marketing Plan • Marketing objectives • Cost of production • Current market environment • Contingency plans • Flexibility

  10. Pricing Targets • Establish minimum price objective • Risk tolerance • Your cost of production • Could use Beef Cow/Calf Enterprise Budget • Your records provide better information

  11. Strategies for Marketing Spring Calves • Wean, Sell Nov. 1 • Background, Sell Jan. 1 • Background, Finish, Sell July 15 • Wean Sep. 1, Finish, Sell June 1 • Wean Nov. 1, Finish, Sell July 1

  12. Wean & Sell Nov. 1 • Calves weaned & sold on Nov 1 (550#) • Benchmark strategy • Cost of Production—Cow costs • Market Value Factors • Pre-conditioning • Source verification

  13. Wean & Sell Nov. 1 • Risk Management Factors • Forward Contract • What, When, Where, Price • Sale Barn • Video Auction

  14. Background & Sell Jan. 1 • Wean November 1 • background 60 days • Sell at ~670# on January 1 • Increased risks • Price risk and opportunity • Rate of gain risk and fleshiness • Mortality and morbidity risk

  15. Background & Sell Jan. 1 • Risk Management Factors • Forward Contract • LRP Insurance • Minimum coverage period is 13 weeks, so insurance must be purchased as appropriate

  16. Background & Finish • Previous backgrounded calves put in feedlot January 1 and fed until August 20 • Increased Risks • Price risk • Opportunity cost • Mortality, morbidity • Weather • Feed price

  17. Wean Sep. 1, Finish • Lower cow costs • More feed yardage costs • Improved quality grade

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