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Why Consider Backgrounding a Calf?

Why Consider Backgrounding a Calf?
By  Stan Smith
 
Typically, when feed prices go down, we see feeder calf prices begin to climb as a corresponding move. That is, unless fed cattle prices are unstable or declining. A fire in a Kansas cattle packing plant just before a report detailing that the U.S. might have planted more acres of corn than earlier anticipated caused the perfect storm that allowed pressure on feeder calf prices at the same time as declining feed prices. With the time of year when the vast majority of U.S. feeder calves are weaned and marketed quickly approaching, there’s little time to develop a plan that might preserve or even enhance some of the value and profit in feeder calves that simply may not be in as strong of demand now as they might have been just a few weeks ago.
 
However, less expensive feed combined with the thought that calf prices can rebound in the coming months once we are past the seasonal tendency for lower prices and the damaged Kansas packing house comes back on-line offer incentive for developing a strategy to hold on to this fall’s feeder calves while also adding value to them.
 
To recap the path that’s brought us to this point, on Friday, August 9 at fire at the Tyson cattle harvest facility in Kansas caused enough damage that it’s expected to be off-line for at least 8 to 12 weeks. This plant was harvesting about 6,000 head per day, or nearly 6% of the cattle harvested in the U.S.
 
While losing 6% of our harvest capacity may seem minimal, it comes at a time when the majority of the kill capacity in the country was at or above 90%, which technically puts them at capacity. With recent Cattle On Feed reports suggesting feedyards are basically full, any slow down in moving them to harvest will pressure the demand for replacement feeder calves until space in the feedyard becomes available.
 
Following on the heals of the Kansas packing plant closure, on Monday, August 12, the National Ag Statistics Service released their Crop Forecast that indicated there were significantly more U.S. corn acres, yield and projected corn inventory than earlier anticipated. This caused down limit corn markets for two days, with further declines in the days that followed.
 
While there may be little that can be done for fed cattle that are market ready, there are some things that cow/calf producers can do if demand for feeder calves is delayed until after a consistent flow of fed cattle leaving the feedyard is restored.
 
In the face of lower feeder prices and cheaper feed – including some less expensive by-products, annual forages planted on PP acres, and poor quality hay that would benefit from being processed and blended with higher quality concentrates, it may be the perfect time to suggest cattlemen explore retaining ownership of their calves and backgrounding them until better calf marketing opportunities appear. There might even be some opportunities for local cattlemen to coop with local dairymen who have recently retired facilities??
 
Backgrounding could not only enhance calf value by adding some lower cost pounds, but it also moves the marketing of the calves to a time when calf prices are traditionally beginning to climb, and also away from the confusion in the market caused by the recent Kansas fire.