Today's Cattle Feeding Environment
5/19/2016
Today’s Cattle Feeding Environment Wade T. Nichols, Ph.D. Senior Technical Service Manager Merck Animal Health
History, Marketing Objectives, Days on Feed, Carcass Transfer, and Economic Endpoints.
What Has The Industry Been Doing Lately?
1
5/19/2016
The Industry is Adding Days on Feed
Live Weight 1996-2016
HCW 1996-2016 2006 - 773 2007 - 773 2008 - 773 2009 - 778 2010 - 781
2011 – 784 2012 – 791 2013 – 796 2014 – 808 2015 – 829 2016 - 831
2
5/19/2016
Dressing Percentage since 2000 Dressing Percent since 2000 0.65 0.645 0.64 0.635 0.63 0.625 0.62 0.615 0.61 0.605 0.6
Percent Choice Carcasses - 1996-2016
What is the Incentive for increased DOF, HCW, Etc. in today’s marketing? - Obviously improved margin Carcass Transfer
3
5/19/2016
Genetics = Yes But Fed Cattle Marketing: Carcass vs Live • TCFA – 85-90% of all fed cattle sold on a carcass basis
CME-DLR 10/3/14
• SDSU Bulletin – Only 22% of fed cattle are sold on a live negotiated contract across the US
Fat Cattle Marketing • So what is the difference between a live contract and a carcass based contract? – There are many • Generally when selling on a carcass basis –Carcass transfer is increased with DOF –HCW, Yield, and Marbling increase »Cattle are bigger and fatter – But for our discussion we will focus on DOF and Carcass Transfer 5/19/2016
WHY is the Industry Moving to Carcass Based Selling? Have the Numbers Changed? Cattle Prices Feed Prices Other Costs
4
5/19/2016
Carcass Prices ($/cwt) 2009-2013 Average, 2014, 2015 Avg
Min
2014
Max
2015
$265 $245 $225 $205 $185 $165 $145 $125 Jan
Feb Mar Apr May June July Aug Sep Oct Nov Dec
5
5/19/2016
Corn Price 2005-2015
Feeder Steer Prices ($/cwt) 2009-2013 Average and 2014 $300 $250 $200 $150 $100 $50
Avg
$-
Min
2014
$1,784.78 was a loser Today they are Close to making Some money -Will take some Max Weight off
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
Napkin Economics Live Basis Carcass Basis Daily Revenue Generation: Daily Revenue Generation: = 2.44 $1.35 = 2.10 $2.15 =$ . =$ . Less Daily Cost = $3.00/d Less Daily Cost = $3.00/d
Net = $0.29/d
Net = $1.51/d
6
5/19/2016
Industry Has Figured Out Incremental Live and Carcass Rates of Gain
Fed Cattle Marketing
Carcass breakeven point
Live breakeven point
Professional Cattle Consultants courtesy of Shawn Walter
Fed Cattle Marketing
Carcass breakeven point
Live breakeven point
Professional Cattle Consultants courtesy of Shawn Walter
7
5/19/2016
Carcass Weight and Value Basically Driven by DOF and Carcass Transfer
1000
Carcass Transfer • Proportion of live weight gain captured in the carcass. –A 700 weight on arrival would have a dressed yield of about 58% –When this steer is harvest at 1400 lb it has a dressed yield of 64.5% –To move the dressed yield from 58% to 64.5% the incremental gain must be above 64.5%
Carcass Transfer • Carcass Transfer = Incremental Gain • 9 studies conducted with 16,000 hd measured carcass and live weight of gain • Carcass gain is 75-90% of live weight gain at the end of the feeding period • Carcass Rate of Gain –80/80 Theory • 80% of closeout gain * 80% carcass transfer
8
5/19/2016
Growth at the End of the Feeding Period: Multiple MAH Trials End Point
Mass Placement Day 0
Day 21
Day 42
Days on Feed
Steer Live and Carcass Rate of Gain Through the Serial Harvest Period Live or Carcass W eight, lb
1500 1400 1300 1200
Carcass Transfer = 85.7%
1100 1000 900 800
Final Wt HCW
700 0
10
20
30
40
50
60
Day of Serial Harvest
Streeter et al., 2012
9
Today’s Cattle Feeding Environment Wade T. Nichols, Ph.D. Senior Technical Service Manager Merck Animal Health
History, Marketing Objectives, Days on Feed, Carcass Transfer, and Economic Endpoints.
What Has The Industry Been Doing Lately?
1
5/19/2016
The Industry is Adding Days on Feed
Live Weight 1996-2016
HCW 1996-2016 2006 - 773 2007 - 773 2008 - 773 2009 - 778 2010 - 781
2011 – 784 2012 – 791 2013 – 796 2014 – 808 2015 – 829 2016 - 831
2
5/19/2016
Dressing Percentage since 2000 Dressing Percent since 2000 0.65 0.645 0.64 0.635 0.63 0.625 0.62 0.615 0.61 0.605 0.6
Percent Choice Carcasses - 1996-2016
What is the Incentive for increased DOF, HCW, Etc. in today’s marketing? - Obviously improved margin Carcass Transfer
3
5/19/2016
Genetics = Yes But Fed Cattle Marketing: Carcass vs Live • TCFA – 85-90% of all fed cattle sold on a carcass basis
CME-DLR 10/3/14
• SDSU Bulletin – Only 22% of fed cattle are sold on a live negotiated contract across the US
Fat Cattle Marketing • So what is the difference between a live contract and a carcass based contract? – There are many • Generally when selling on a carcass basis –Carcass transfer is increased with DOF –HCW, Yield, and Marbling increase »Cattle are bigger and fatter – But for our discussion we will focus on DOF and Carcass Transfer 5/19/2016
WHY is the Industry Moving to Carcass Based Selling? Have the Numbers Changed? Cattle Prices Feed Prices Other Costs
4
5/19/2016
Carcass Prices ($/cwt) 2009-2013 Average, 2014, 2015 Avg
Min
2014
Max
2015
$265 $245 $225 $205 $185 $165 $145 $125 Jan
Feb Mar Apr May June July Aug Sep Oct Nov Dec
5
5/19/2016
Corn Price 2005-2015
Feeder Steer Prices ($/cwt) 2009-2013 Average and 2014 $300 $250 $200 $150 $100 $50
Avg
$-
Min
2014
$1,784.78 was a loser Today they are Close to making Some money -Will take some Max Weight off
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
Napkin Economics Live Basis Carcass Basis Daily Revenue Generation: Daily Revenue Generation: = 2.44 $1.35 = 2.10 $2.15 =$ . =$ . Less Daily Cost = $3.00/d Less Daily Cost = $3.00/d
Net = $0.29/d
Net = $1.51/d
6
5/19/2016
Industry Has Figured Out Incremental Live and Carcass Rates of Gain
Fed Cattle Marketing
Carcass breakeven point
Live breakeven point
Professional Cattle Consultants courtesy of Shawn Walter
Fed Cattle Marketing
Carcass breakeven point
Live breakeven point
Professional Cattle Consultants courtesy of Shawn Walter
7
5/19/2016
Carcass Weight and Value Basically Driven by DOF and Carcass Transfer
1000
Carcass Transfer • Proportion of live weight gain captured in the carcass. –A 700 weight on arrival would have a dressed yield of about 58% –When this steer is harvest at 1400 lb it has a dressed yield of 64.5% –To move the dressed yield from 58% to 64.5% the incremental gain must be above 64.5%
Carcass Transfer • Carcass Transfer = Incremental Gain • 9 studies conducted with 16,000 hd measured carcass and live weight of gain • Carcass gain is 75-90% of live weight gain at the end of the feeding period • Carcass Rate of Gain –80/80 Theory • 80% of closeout gain * 80% carcass transfer
8
5/19/2016
Growth at the End of the Feeding Period: Multiple MAH Trials End Point
Mass Placement Day 0
Day 21
Day 42
Days on Feed
Steer Live and Carcass Rate of Gain Through the Serial Harvest Period Live or Carcass W eight, lb
1500 1400 1300 1200
Carcass Transfer = 85.7%
1100 1000 900 800
Final Wt HCW
700 0
10
20
30
40
50
60
Day of Serial Harvest
Streeter et al., 2012
9
