By Dr. Kenny Burdine
Over the last few months, I have been able to talk with a lot of cattle producers at Extension programs. As you can imagine, the strength of the cattle market is almost always the first topic of discussion. We are seeing prices like we have never seen before for cattle of all types and weights. But my observation has been that producers tend to become a bit more enamored than they should with price per pound and sometimes don’t think as much as they should about value per head.
I see this play itself out in a couple ways. First, I hear some producers talk about selling cattle sooner to capture the higher prices. I don’t necessarily think that downside price risk is greater in high priced markets, but I think there is a perception among some that there may be “more to lose”. This perception lowers interest in adding value to cattle by taking them to higher weight before sale and leads to more calves being sold off the cow, as opposed to being weaned and preconditioned.
Secondly, I think people get too focused on price per pound differences across weight categories and don’t make the mental adjustment to the new price environment. To illustrate this point, I am going to use Kentucky average auction prices from the last week of March. The table above shows the average price for medium / large frame #1-2 steers at 450 lbs, 550 lbs, and 650 lbs. For transparency, I am using the average prices for cattle without a description (not value-added or fancy), which represents most cattle being sold. Also, I am averaging the 50 lb weight ranges to arrive at my average price. In other words, the estimated price per lb for a 450 lb steer is the average of the 400 to 450 lb and 450 to 500 lb weight ranges.
Examine the average prices from Kentucky last week in the table for 450 and 550 lb steers. The price per pound drops by $0.50 on that 100 lb increase in weight. If one looks solely at price per lb, they may be tempted to sell calves sooner and avoid the $0.50 slide. However, in this cattle price environment, those 550 lb steers were still worth $113 per head more than the 450 lb steers. The relevant question becomes whether that difference justifies keeping those 450 lb steers longer. In many cases, the answer to that question may be yes, especially in the spring with pasture starting to grow.
To be fair, cattle prices are extremely high by historical standards. Price slides widen as the overall market gets higher and we have never seen a calf market this high. What may have seemed like a bizarre price slide a few years ago, may make perfect sense now. For example, if 450 lb steers were selling for $2 per lb and we applied the same $0.50 price slide for 550 lb steer, that 550 lb steer at $1.50 per lb is actually worth $75 less than the 450 lb steer at $2. But that is irrelevant in the current market.
The main point is that the spring 2025 feeder cattle price environment is like nothing we have seen before. Given that, we must be careful about using rules of thumb and simple approaches that may have worked in the past. Focusing on price per lb, without consideration of weight impacts, can be very misleading. And one needs to be careful they aren’t chasing price per lb at the expense of value per head!
Source : osu.edu