 So, I'm going to talk about as I've done the last few years about using these backgrounding budgets that we kind of create here at NDSU and under some different scenarios for both steers and heifers across North Dakota based on current prices of both cattle and production costs and everything else that we're dealing with this time of year as we're trying to make these backgrounding decisions across the state. And so, initially I want to do a little bit of a defining of some terms and some boundaries on what we're considering here. And when I'm talking about, if I mentioned weaned calves just so we're all on the same page, I know everybody knows what weaned calves are, but typically 500 to 600 weight, maybe up to 650 pounds. And this is typically the thing to keep in mind here also, it's the largest price difference between heifers and steers. Okay, so in other words, the price per hundred weight, typically the lighter weight the calves are, the greater the differences between heifer and steer prices per hundred weight. Then, you know, backgrounded or heavier weight calves is going to be in the 750 sometimes 700 to 900 pound category. Often this price gap closes between heifers and steers per hundred weight from 15 to 20 bucks as much as 25 bucks ahead in the lighter weights down to about $5 per hundred weight. And so, that's when we're talking about closing that price slide between heifers and steers and often why backgrounding heifers as we'll see here in a bit is so beneficial is for this reason right here that this price slide closes. And then we have our finished cattle category. I'm pushing those animals up to 1350 pounds. And in this category, the price gap between them, the slide difference, it mostly disappears in this category because they're essentially finished. So this is what I and now when we're talking about lighter weight calves versus heavy weight calves. Okay, we're all aware that the lighter the weight, the higher value they have per per hundred weight typically. But overall the weight the overall values lower because you know what a 900 pound calf, it just weighs more 50, you know, 50% more than a 600 pound calf so per hundred weight it may be a little bit lower. But it overall value it tends to be higher so this is just how the price slide as a you know 2018 had had behaved essentially showing the price per hundred weight as the weight of the calves tends to tends to go up. Alright, so these next ones I want to talk about are concepts that Tim had hit on and it has to do with the price of corn. And these are a little bit dated but they come from Kansas State University and they illustrated pretty nicely on a few concepts of backgrounding that we deal with or even finishing out calves and that is that as the price of corn goes up. So we can use corn just in a sense as the price of feed. Okay, so in this case we're just using corn but the price of feed as well, which tends to get pulled up with corn often. And when you look the highest price corn $3.52 per bushel when this study was done. And what you notice is that line is flatter. So that's the one here with the blue diamonds here that's $3.52. So the price difference per hundred weight is the lowest when the price of feed is the highest. Okay, so why is that true? Well, because it costs quite a bit, it costs more to put weight on per pound. Okay, so it drives down the price of feeder calves, lighter weight or weaned calves and pulls up the price of 800 weight, 900 weight calves because it costs more to get the weight on. And feed lots and finishers are saying, okay, well, there's less risk now of feed prices being volatile or whatever because this is a heavier weight animal and I'm willing to pay more for it. So you get this relationship where it drives down the price of feeder cattle a little bit drives up the price of heavier weight calves and you get a flatter line. When corn prices are cheap, relatively, in this case, it was, you know, way, way low at $1.68 a bushel, but the relationship is the same. When feed prices are low, the price of lightweight calves goes up because there's a lot of money to be made with cheap feed in order to pack the pounds on these lighter weight calves. And then the relative price of heavier weight calves goes down. That doesn't mean all the heavier weight calf prices in total go down. It just means the relative price of feeder calves versus heavier weight calves. It moves that line this way. Okay, so it could be the case that all cattle prices go up. It's just that feeder cattle prices are lighter weight calf prices go up faster than the heavier weights when when feed prices are low. So that's that sort of inverse relationship. And Tim talks about that all the time with respect to corn prices and cattle prices. And then finally, and this one can be a bit confusing if you haven't seen it before. And this has to do with what fed cattle prices do on the on the relationship of the price spread. And what it essentially says is the higher that fed cattle prices are, the bigger the price gap is between lighter weight calves and heavier weight calves. And that's because the risk is is lessened. Okay, if I got high fed cattle prices. I want to as cheaply as I can pack the pounds on to make as much money as possible so I'm willing to pay a bit of a premium for lighter weight calves. And I'm not so worried about the cost of the feed as much. And so I'm not going to pay a premium for the heavier weight calves. And then vice versa, if the fed cattle prices are low, then that brings up the relative value not the overall value but the relative value of heavier weight calves, because there's there's there's less risk. The price is low but they're heavier so there's less risk I'll pay a little bit more for them which which kind of covers me if it takes a turn because perhaps the margins are a bit thinner. All right. So, in a nutshell that's that's that's how a lot of that works and then we look at some seasonality. That's going to goes on with this too. And that is US cattle prices by month and this is only showing three years and it's not so important to focus in on the price in any given year but so much that we tend to see that spring cattle prices. Okay, tend to be higher than than fall and that's for obvious reasons. Most most areas, especially in the plains northern plains they they have in the fall so you're going to have more animals hitting the market, but you know feeders need new cattle coming in at you know all the time so they may have to pay a bit of a premium to get them. And, and there's other reasons but but for the most part, we can see that those those spring calf prices tend to be a bit higher. And that's another way that you know backgrounded cattle can can can actually pay. So, moving into the scenarios. Good news this year. The feed prices are lower than they had been last year. I'm just showing this slide real quick to shoot use and show some of the assumptions. The biggest ones yardage in our budgets, it's 35 cents a day I crank that up to 45 just just due to some energy costs and some other factors. Interest is much higher than last year's we're using eight and a quarter but I've seen some operating node interest rates as high as nine so I may be a little bit too low on those, but these feed costs have have come down compared to a year ago. And here's our six scenarios that we're going to look at here, a low rate of gain steer scenario from 500 weight to 800 weight. The cost to gain on that was $3 per day per head per day. 2.8 pounds so a moderate ration here moving from 575 weight to 855 weight and those cost $1 32 a day. And then a finished steer scenario 3.6 pounds per day ration pretty aggressive going from 575 to 1375. And that cost per day is a buck eight. And then our heifer scenarios. So a lighter weight heifer scenario at 1.7 pounds. Okay, so in this one we're going from 450 to set almost 750 little over feed costs on that's a little under a buck a day 98 cents a day. A little bit heavier weight heifer same same rate of gain but a little bit heavier to start off and a little bit heavier. When we sell that feed cost $7. All right, and then 2.8 pounds so much more aggressive average daily gain 525 to 805 and the feed cost on that obviously is going to be higher because it's a more aggressive ration at $1 28 per day per head. So here's just the comparison between the two I apologize on my last scenario I had $1 7 it's actually a dollar eight like you see here in the corner not a big deal but makes about a dollar plus difference so it's not a huge deal but I just wanted to I didn't get it changed on the last slide but the dollar eight is correct. So last year's feed prices you can see the ones in red or last year's per head per day costs with the exact same scenarios this year quite a bit cheaper again because those feed costs this year. Corn prices meal prices silage all that stuff a lot cheaper this year than it was a year ago. So obviously that's going to that helps out a good bit. All right so we start with the steer scenarios and this is the prices I pulled and they're pretty pretty much the same as Tim's there. I averaged the prices for for instance for your 550 weights or your 500 weight animals and then I used the projected price around that 230 bucks for the for the sales price which is pretty close to exactly what Tim had had just mentioned. And again you know the market fluctuates when you got record high prices you got record high volatility so depending on the week that you view this could be off quite a bit could be a little low could be a little high just depends. And we'll talk about obviously the intent talked about the risk management tools that are available to avoid some of that. And then for live cattle prices I use the futures for finished cattle for that one finishing scenario and I have $170 per per hundred weight for finished cattle on average for summer of 24 which is when our finished scenario would end in this particular presentation. So scenario one 500 to 800 weight 1.7 pounds per day. Here's the ration grass and I thank Carl for for helping put these rations together and the cost big part of that obviously silage DDGs salt comes out to $1 three per day. And then so using our NDSU budgets or spreadsheet I do some modifications to it just for this presentation but you can see that scenario up here sets projected selling price $230 and this and this is real important to do so make sure you do this is when you bring the animal into your backgrounding operation make sure they're priced you know accordingly obviously to what you would have been able to get if you to take them to to the sale barn on you know around this time a year. In this case I've got it at 281 bucks per hundred weight for these for a for a 500 weight steer projected selling price of 800 pound animal $230. There's our feed costs our interest our yardage I dialed down the trucking costs from last year is diesel prices are a little bit lower and then our death loss and shrink. So all that to say that we essentially break even in this scenario and this has been true for the years that I've been putting this together it's on a. A limited ration or a lower ration for steers it is really tough to come up with or arrive at a number that is much above break even the biggest reason is they're in the yard for 176 days to accomplish this and you got this yardage fee hanging out there 45 cents per day you know that's costing you plus plus interest obviously is adding up and the only way that this really works is if you're able to really get these feed costs down or your yardage fees are just substantially lower than this somehow or the market. Shoots up and essentially you're speculating on the market taking a turn but all things equal the low ration steer. Scenario rarely is above break even it's usually at break even and and the and often that's because you know steer prices for these 500 weight tends to be pretty high and that's $281. All right here's our second scenario bit more aggressive 2.8 pounds per day obviously that's going to cost more to accomplish so we're up to $132 per $132 a dollar 32 excuse me per head per day. And so this this ration changes a bit you're putting in some corn some DDGs grass legume hay etc. Now this one is obviously a much more profitable scenario more profitable than the lower 1.7 pound per day mainly because you're you're only in the yard 100 days instead of 176 so yardage isn't eating away at it. And in this case our return is about $57 per head and and really not not a whole lot of difference in there it is it does cost more per day obviously but it's the same yardage. The same interest rate but you'll notice the interest expenses lower because they're not in there you're not financing the cost of production for his long and that interest adds up. And as a result we wind up turning you know a 50 $57 per head profit on the steers and all we did was was increase the feed to him and try to try to put on about 2.8 pounds and it's the same essential prices $281 beginning value. And then coming out at 230 $230 per per 100 weight on that scenario. Then our final steer scenario in this case is our finished finished steer scenario 575 to a 1375 pound animal at 3.8 pounds per day. Again obviously that's going to be a lot more costly to put that much weight on that fast more pounds of feed going in to pull that off and so we wind up with a with a finished finished steer. And I'll go straight to the budget on this. Here's that projected selling price and this is based on the summer futures for for fed fed cattle 175 bucks beginning value on this a bit lower because it's a heavier weight cap coming in at $271 per 100 weight is our feed cost. And the finished year expected return is $127 and 28 cents per head and 57 cents per day profit I put those in there just so you know how much you're essentially putting on or gaining doing what doing what's being done. But with this scenario to keep in mind and I'll talk about this toward the end to I mean that's a long time 222 days as a long time for a lot of stuff to happen in the cattle markets. So if somebody was looking at taking something like this on putting together some kind of risk protection program LRP or what have you is really important from the standpoint of and I'm going to show a scenario at the end that if this if this 175 here because the 271 is locked in I mean once you bring the calf into your into your lot that price is paid. Okay. The feed costs and fluctuate some interest can fluctuate as well but it's probably not going down anytime soon but if I manipulate this projected selling price and move it downwards. Not even a lot 1015% this this turns really red really fast. And so 222 days is an awful long time to be be hanging out there hoping that that things don't take a turn and it's like Tim said you don't have to buy. The highest priced policy out there for you just got to figure out what your break even price is and then put a floor in so that at the very least, you know, eight nine months from now, we're not losing our shirt. All right to the half or feeding scenarios. All right. And here's the prices. I pulled them somewhat recently, you know, pretty much following tracking along with exactly what Tim quoted I'm using averages because again, depending on the day you check, could be off by 567 bucks 100 weight limit up or limit down in any given day. So this is more for planning purposes but but you got to know that when you take one calf into your backgrounding operation whatever the price is that's, you know, that's what it is that's what you got to jot down. So our first scenario, a low average daily gain 1.7 pounds a day and we're starting with a pretty lightweight heifer 450 pounds and taking her up to 756 and just under a buck per day to pull that off is what we're projecting based on the current feed prices 98 cents a day. That takes about 180 days to accomplish and look almost almost $90 ahead 49 and a half cents per day. And the biggest the biggest reason is is a big reason for that if you look the projected sales price 220 bucks and the beginning value, you know, the beginning values considerably lower coming in. And this is for a 450 weight heifer so I mean if it was a lighter weight steer that'd be quite a bit higher than this if you're looking at a comparison when I was using 281 to bring the steers in at five five and a quarter. And then the projected sales price that if you just look at the if you just look at the cash markets how much that gap close this is what I was talking about before. And this is where we get some of these gains that and this isn't the as profitable of the most profitable scenario but even at a pretty modest rate of gain we're looking at almost $90 per head backgrounding these these lightweight heifers even on a on a moderate ration. Pulling in the the 1.7 pound per day heifers from 550 to 850 so we're starting with a larger a larger calf and and selling a larger calf that's going to that's going to cost more per day even though our average daily gain is a little bit lower. And it's fairly similar to the last scenario, essentially, whether you start with a 450 weight or a 550 weight if you feed out to 758 50 you're looking at 85 or so dollars per head in both of those scenarios. So, again, a lot of that coming from closing that price slide gap that projected sales price, you know dropped a little because I went from 800 a 50, but the beginning value I mean is quite a bit lower. If you'll recall steers at 550 were closer to 280 bucks. All right, so, you know, 40 $40 $40 drop for heifers coming into your operation at 550 versus steers and that a big reason for the explanation of this 80 $84 per day, despite 176 days on feet. Okay, so I just want to make that clear that's that's why that's happening. That's why you see it and and why, you know, backgrounding heifers in North Dakota has typically been a money making endeavor, especially when you, you know, use a lot of the tools that are available. And then our final scenario in this is 525 to 805 but we're putting trying to put on weight quite a bit faster going from 1.7 to 2.8. Again, that's going to cost more $1 28 per day to put that put weight on that fast and then obviously we're going to have to include some more in the ration to do it. But what that does is it drops the days on feed from, you know, 176 to 100, which is, you know, what you saw in the last scenario. Okay, projected selling price, the same beginning value coming in it's still a 525 or 550 waiter so the same. Okay, and what do we notice a really strong profit on this one almost $172 per head. If you if you go the aggressive more aggressive ration route or $1.72 per head per day. And in this case, the value of putting on the weight is adding up as well as the shorter term in the lot only 27 and a half bucks in interest. The lot costs aren't adding up as fast you're down to $45 because it's 45 cents over 100 days. And we've closed the price slide gap so this is sort of a all the benefits of backgrounding, especially with respect to heifers are all coming together in this in this particular scenario with a with a more aggressive ration. So shorter days in the lot, closing the price light gap, etc, etc. It's just this is this. I've been doing this now. Three or four years and every, every time that I do it whether it's a leaner year or a stronger year. This tends to be the most profitable scenario almost every single time and once there's something kind of strange going on with fed cattle. You know, live cattle prices or something like that, then sometimes finishing can be the can be the ticket as well. So here it is in summary all six of our scenarios and I just wanted to put this in there because as I go through that I'm going through spreadsheets and I'm going through the rations and everything and hear how you can compare it. The low rate of gain on steers from 500 to 800. It's pretty much a break even proposition. More aggressive ration 525 to 805. Yep, there's money to be made there, you know $57 ahead. And if you're going to background a bunch of heifers anyway, and it's not going to take a bunch of extra overhead and effort to do it. You might as well do it and go ahead and hopefully make around 50 60 bucks per head there. Finishing is profitable as well. We've got strong live cattle prices fed cattle prices. So you could be looking at making as much as $127 $130 ahead. The heifers are the ticket right now 90 $85 and even compared to our finished steer scenario. Right now that that aggressive heifer ration 2.8 pounds with these feed prices and these current cattle prices that one's that one's the highest overall profit loss per head of all the scenarios that I run by by a pretty wide margin. Again, it's because of that, you know, perfect storm of things coming together that's in favor of heifer backgrounding making that happen. So as I said before about putting in a floor, especially when it comes to the longer term decisions that are being made, I just want to use an example here. So if I take the 550 to 850 weight heifer scenario, which is the 1.7 pound per day. Okay. If I increase feed costs 20% over the projection. So I go from $1 8 per day to $1 30 per day. So let's say I totally with on my feed cost calculations. They're actually 20% higher, maybe even 30% higher. My profit drops from $84 per head to about $45 per head. Okay. So that's not great, but it's not the end of the world. I'm still making a profit. I'm still covering overhead. I'm still covering everything else and I'm actually actually making a profit in the end. On the flip side, if my 850 weight heifer projection declines from two, let's just say 10%. That's not a massive swing. Okay, 10% in that amount of time, 176 days or so from $216 to $194. I go from an $84 profit to a $92 loss that fast. So I can increase feed costs, my projected feed costs 10%, 20%, 30% and still have this remaining above zero, you know, or at least breaking even or whatever. What I cannot have with these, the price of these cash coming in, I cannot have them going down 10% or 20%. Especially at these prices, that would be an absolute disaster. That's a disaster. And that's why we're really emphasizing putting in a floor at these prices. It's not that we expect cattle prices to decline. The expectation is that they're going to continue to go up. It's just that the cost of them declining is so severe at these high prices. It's nice to put in a floor. And it's like Tim said, we hope we never use it. Our goal would be to put in, you know, a break even or if you want to maybe a slightly above break even and we never use the thing, right? That cattle prices, calf prices continue to go up this spring. And it just gets put into our budget as a cost of doing business. That's the ideal scenario. But if the worst case scenario happens and they do fall 10%, 20%, this at least makes sure that we don't absolutely lose our shirt doing something like this. And we're good to go the next year. So that's a lot of the reason that we're really pushing this risk protection tool is it's a way to ensure that we don't wind up in a scenario where the loss is just so severe that it puts us in a bind. That's the last thing we're after.