Central Fl Cracker
Well-known member
From the Stocker email Magazine
Stocker Economics
Diluting Stocker Risk With Cull Cows
It might not be the easiest money, but adding weight to cull cows may be the surest money stocker and backgrounders can make.
According to Cattle-Fax analyst Mike Murphy, members of that organization have averaged $64/head profit in 23 of the last 23 years by purchasing cull cows in November, putting 1.5 lbs. average daily gain on them for 95 days, then marketing them in February.
Besides the profit predictability, Murphy says the enterprise bears consideration by stockers because the timing still allows time to purchase cattle for spring and summer grass programs.
Moreover, it illustrates the type of diversity stocker operators and backgrounders may need to consider as operating costs and price volatility increase.
"We've just come though the best three years of stocker profitability in our history," Murphy said at last month's Mid-South Stocker Conference in Tennessee, hosted jointly by the University of Tennessee and the University of Kentucky. As cyclical beef herd expansion takes place though, profits will be tougher to come by. In fact, Murphy says typically within the first two years of a cyclical transition -- the part of the cycle the industry is currently in --there comes one of those gut-wrenching, backbreaking kinds of price wrecks that are tough to endure.
The risk this time could be higher because prices are at historic highs, as are the price spreads between feeders and feds, and feeder cattle and calves. That's before considering the growing range of prices paid for same-weight, same-class cattle.
At this stage of the game, Murphy believes stocker management strategies should include: focusing on equity protection, managing inventories through average buying, looking for opportunities to manage risk through the futures market, and evaluating potential for retaining ownership beyond the stocker enterprise.
Some of the long-term trends he cites for the stocker industry:
Continued, significant structural change within all segments of the beef industry.
Continued shift to fewer, larger, better-capitalized operations.
Continued market volatility.
Continued evolution toward more fed cattle being marketed on a beef value basis rather than in the cash market.
Increased product branding, product differentiation and price variation.
Most consumer beef sales will take place through food service rather than food retail within five years.
Animal ID and source verification will be required to compete in the global, post-BSE marketplace.
Stocker Economics
Diluting Stocker Risk With Cull Cows
It might not be the easiest money, but adding weight to cull cows may be the surest money stocker and backgrounders can make.
According to Cattle-Fax analyst Mike Murphy, members of that organization have averaged $64/head profit in 23 of the last 23 years by purchasing cull cows in November, putting 1.5 lbs. average daily gain on them for 95 days, then marketing them in February.
Besides the profit predictability, Murphy says the enterprise bears consideration by stockers because the timing still allows time to purchase cattle for spring and summer grass programs.
Moreover, it illustrates the type of diversity stocker operators and backgrounders may need to consider as operating costs and price volatility increase.
"We've just come though the best three years of stocker profitability in our history," Murphy said at last month's Mid-South Stocker Conference in Tennessee, hosted jointly by the University of Tennessee and the University of Kentucky. As cyclical beef herd expansion takes place though, profits will be tougher to come by. In fact, Murphy says typically within the first two years of a cyclical transition -- the part of the cycle the industry is currently in --there comes one of those gut-wrenching, backbreaking kinds of price wrecks that are tough to endure.
The risk this time could be higher because prices are at historic highs, as are the price spreads between feeders and feds, and feeder cattle and calves. That's before considering the growing range of prices paid for same-weight, same-class cattle.
At this stage of the game, Murphy believes stocker management strategies should include: focusing on equity protection, managing inventories through average buying, looking for opportunities to manage risk through the futures market, and evaluating potential for retaining ownership beyond the stocker enterprise.
Some of the long-term trends he cites for the stocker industry:
Continued, significant structural change within all segments of the beef industry.
Continued shift to fewer, larger, better-capitalized operations.
Continued market volatility.
Continued evolution toward more fed cattle being marketed on a beef value basis rather than in the cash market.
Increased product branding, product differentiation and price variation.
Most consumer beef sales will take place through food service rather than food retail within five years.
Animal ID and source verification will be required to compete in the global, post-BSE marketplace.
