This is a guest post written by Brenna Grant, Research Analyst with Canfax Research Services.
Cow prices seasonally decline 16.5% from July to November. This year the drop was sharp happening all in September. Prices have stabilized and even rebounded in recent weeks after dropping from $78/cwt in August to $64/cwt in October. The October average was below year ago for the first time this year. Prices have inched up to $65/cwt in November to be back above year ago levels. Prices typically increase 16% from the November low to a spring high in March. Given that part of the drop seen in September and the low October prices was due to the temporary closure of the Lakeside plant in Brooks, the increase from now to the March high is expected to be higher than typical at around 19% ($77/cwt). A higher spring price will be supported given (1) current prices are depressed with the Lakeside plant not having access to the US market yet, (2) strong North American demand for trim will support prices moving into the spring, and (3) smaller cow marketings anticipated in 2013.
Therefore, if you had a 1250 lb cull cow in November with a price of $65/cwt, that is $812.50/head. If you sold her in March with an average spring rally to $75/cwt with 100 lbs of gain at 1350 lbs, that is $1,012.50/head. So there is a $200 gain for 4 months (120 days). Assuming a basic feed cost of $1/day ($120) gives a gross margin of $80/head for selling in the spring (or $0.67/day for the aggravation of keeping the cow that long).
If you sold that same cow in March assuming a larger spring rally to reach $77/cwt at 1350 lbs that is $1,039.50/head. So there is $227 gain less feed for 4 months (120 days) at $1/day ($120) gives a margin of $107 for selling in the spring (or $0.89/day for the aggravation of keeping the cow that long).
This is assuming these are regular culls that are going to grade D1,2 regardless of when you sell them. If you are looking at a D3 that could be brought up to a D2 over the winter there is an additional advantage as the price spread is typically around $7/cwt, assuming the cow is able to gain weight on this basic ration over the winter.
The sharing or reprinting of BCRC Blog articles is welcome and encouraged. Please provide acknowledgement to the Beef Cattle Research Council and list the website address, www.BeefResearch.ca.
We welcome your questions, comments and suggestions. Contact us directly at firstname.lastname@example.org or generate public discussion by posting your thoughts below. Stay connected by following us on Twitter @BeefResearch, liking us on Facebook, and subscribing to our YouTube Channel.