West Virginia University
Extension Service - Animal Husbandry Specialist 1997
The spring feeder cattle sales have just come to a close, and West Virginia beef producers have weathered one of the toughest winters physically and economically. The cattle market this winter was as mean as the weather. Since October, prices for feeder cattle have slipped $10 to $20 per hundred. The beef industry has been challenged with historically high grain prices and large supplies of beef, pork, and poultry competing for the consumer dollar. It is easy to understand why the demand for yearling feeder cattle diminishes when the cost of gain is $80.00/cwt and finished cattle are selling for $55.00/cwt.
Many potential feeders are beginning to feel the pressure of lending institutions that want to cover debt with the higher price grains and discourage feeding cattle this year. Lurking in the background this summer is an increase in production costs due to substantial increases in fuel and fertilizer costs. Unfortunately, many of the stocker cattle that are being grazed in the state were purchased last fall at a premium relative to spring prices. Weather apparently will be the controlling price factor for many cattlemen. The cornbelt needs a good moist summer to increase feed grain supplies and, here at home, producers are going to need an excellent forage season to optimize gains. As long as it is cheaper to buy gain than it is to put it on, the market will continue to be in favor of heavier cattle. There will not be much relief in grain prices until harvest is accounted for in the bins.
West Virginia producers need to begin developing or evaluating the available marketing options for their feeder cattle next fall. If you wait until August to develop a market plan, then you will likely be ill-prepared to take advantage of opportunity or even be able to recognize one. A number of options are available to producers. However, those who have less than trailer-load lots face additional challenges without prior preparation. A key component that allows for valid comparisons of different marketing options is an evaluation of production costs and returns.
Many veterans of the cattle business are fond of declaring "In the old days, all you had to do to make money was get 'em to market." Times have changed; in today's mature marketplace, production skill alone will not provide a superior edge. Super management skills -- particularly sharp marketing -- will provide the competitive edge.
The most difficult task of marketing is deciding what you're going to do. That is why many producers skip this step. Unfortunately, producers without a sound strategy are heading for trouble. A person can waltz along profitably for years when the market shifts or competition stiffens or technology sideswipes him, he pays the piper. The West Virginia producer who will weather today's market is one who has been fine tuning operations by selecting for medium #1 (M1) cattle, preferably black or black white face (BWF), that are uniform in size (weight spread less than 100#), and integrated into a strong forage program with few external feed costs. Those with off-colored cattle and little uniformity are facing some severe discounts.
The spring price summaries illustrate the differences. Once you drop out of the Black, BWF, and Charx cattle, discounts were $50 to $100 per head. Another reason for the discounts is lack of volume and uniformity in the colored breeds. Obviously, if a person is going to handle colored cattle (Reds-Spots-Grays), it will pay great dividends to investigate alternate markets. There are a number of these programs such as Laura's Lean, Monforts Tech, Red Angus Beef, and Certified Hereford Beef. All of them require producers to organize themselves in order to group cattle into load lots to the program specifications. The weakness of the special-graded sales is having lot sizes large enough to assemble these cattle into uniform loads. Many of the special marketing programs are beginning to require a database on breeding, health, and performance of cattle before qualifying. The special-graded sales lose these data from small producers. However, board sales are an excellent route for producers or groups of producers to merchandise "performance."
Developing a crop of feeder calves uniform in type and performance is the beginning point in providing a consistent product that both the industry and consumer is demanding. Failure to meet industry goals results in product defects recovered through discounts in pricing. Market plans have to include development and testing of the product to ensure that it does fall within the "industry target." The West Virginia Product Evaluation Program was developed to help the small producer evaluate his or her program and to help the West Virginia feeder cattle industry meet specifications of the beef industry.
Industry Target Steer Qualification
|Carcass Weight||625 - 850 lbs.|
|Quality Grade||Choice (-) or better|
|Back Fat||< . 50 inches|
|Ribeye Area||12 - 16 sq inches|
|Yield Grade||< 3.0|
|Feedlot Gain||>3.0 lbs/day|
It's time to sit up or down and figure out why we are in the cattle business, where we want to go, and what steps it will take to get there.
Above all else, marketing is creating value for the customer that is worth more than the cost of providing it. It is essential that producers understand the difference between sales and marketing. "Sales" are acquiring orders for the cattle currently being offered. "Marketing" is the planning that will get future orders for cattle and/or for services NOT now offered.
In any sales transaction, there are several steps that lead to closure. The first four are established in marketing while the last three are part of the sales process.
- Making your existence known.
- Accurate positioning knowledge. (What you are known for: good or bad)
- Inquiries coming in or outgoing requests for orders.
- Fact finding about customer's objectives.
- Handling objections.
Now you have to evaluate your program or even the market situation in West Virginia to determine your market position. What is the value of the package you or the West Virginia system is offering? Look at the variables you control:
- How accessible the product is to the customer
- Services provided
- Image of what you think customers are getting
- Promotion - Do you communicate value?
Study the preceding items. If you can fill in details about each, then you have the essence of a marketing plan.
In any business, it takes time and effort to build a marketing plan, but the payoffs
can be enormous. An enterprise that has a strategically sound marketing plan in place is
ready to move with the market. It is prepared to take advantage of sudden opportunities
and to outsmart the competition. It is also most likely to have customers who can finish
the sentence "Oh yeah, you're the farm that __________________".
West Virginia 1996 Spring Sale Summaries Steers
|Breed||No. Head||Avg. Wt.||Avg. $/Hd||Price $/cwt|
|4/13||Blk & BWF||676||641||355.35||55.45|
|4/20||Blk & BWF||514||536||307.85||57.89|
|4/27||Blk & BWF||580||565||312.97||55.38|
West Virginia 1996 Spring Sale Summaries Heifers
|Breed||No. Head||Avg. Wt.||Avg. $/Hd||Price $/cwt|
|4/13||Blk & BWF||672||559||240.13||42.99|
|4/20||Blk & BWF||940||577||281.59||48.78|
|4/27||Blk & BWF||582||510||199.42||39.07|
1996 Spring Sale Summary: Breed Comparison
1996 Spring Sale Summary: Grade Comparison