 Here, this calf market has surprised the heck out of all of us. Who thought a year ago, when you sold $1,000 steer calves, we'd be talking about $600 steer calves this year? Nobody. It couldn't happen, could it? Well, it did. What happened to those $1,000 calves you sold to some feeder who put them on feed and fed them for 200 days? He didn't do so good. So he ain't so happy to buy them again, is he? So it's a little bit kind of a bad situation. Like Carl mentioned, feed is pretty cheap. So we got a real weak market, lack of buyer interest, and cheap feed. Bund and hay, some salvage feeds like this scabby wheat, low interest rates. So we're going to start thinking about what should we do? Let's not sell the day. Tomorrow could be a lot better market. How many of you believe that? It's going to be a lot stronger if we just hold off a while. Can it go down further? It could. We've dropped so much now. I think we're starting to find a little floor, but I won't say it is the absolute. But I think waiting to market, hoping for a significant price recovery should not be your strategy, because if we look at future prices out, that's not the trend. Can we feed to heavier weight, create more gross dollars, and maybe market to our home, our hay, that doesn't really sell for much money unless we put it into a calf and make pounds out of it? And can we get some margin out of that? Yeah, I think we can. Carl's already showed you some examples. Looks like there is some return to that. You got low cost, abundant feed at home. You got calves at home that are being undervalued in today's market. Put your feed into them, create more dollars, get your feed marketed. Hopefully above the feed value, there's even a little margin for you. And that's what we're going to talk about. And then I always kind of look for, where are the sweet spots in these markets? If we're going to feed calves, hold calves, do stuff with calves, we have to have a target in our mind of what weight do we want to get to, and what months or time do we want to sell them? I can't seem to find the expertise to tell me when that exact moment is. But I've noticed over time, there's kind of a sweet spot for green feeders late in the year for guys who want to go to grass with them. So if you're calving really late, and you got these June calves, what do you do with them? Well, maybe just target a market green calf market. The other sweet spot that's starting to show up as more people calve late, the heavy calf in October is getting to be a premium calf. Or a calf that can finish in an April finishing slot. So if you got calves that might fit that, don't slow them up. Feed them hard enough, heavy enough and give them to town quick enough so they get that market premium. Other than that, I'll let Tim fill you in on the next sweet spot. Risks. Well, it's a lot of people don't want to feed calves because, you know, there's too much risk. If they're your own calves, you got a good herd health program you vaccinated, your cows have a mineral program and you feed them well, you shouldn't have too much health problem. If you're putting co-mingled sale barn cattle together to be a cattle feeder, you got to have another set of skills. Identifying calves before they know they're sick, treating them and all that stuff. Poor performance. Carl mentioned if we don't have a ration put together right, we're missing an ingredient, too little protein, out of balanced calcium, we can get poor performance and then we get a poor return on our feed. And the one we're afraid of most years, and we should have been damned afraid of two years ago, when we could get $1,500 a calf, we background and the market go down in the three month period we're doing it. This year we're starting out at a pretty low place. I don't think she's gonna collapse, but we can talk about protecting that too. The really, really good managers would know what year's to do this. Huh? Look at, back in 10 they made 70 bucks a calf backgrounding, 2014 cost you five bucks. On average it's about 30 bucks. You do it every year, long haul, you're gonna make about 30 bucks. Above your feed, above your yardage, to background a calf. Let's talk about where we think 16 might be. Well, before we can do that, we gotta at least figure out what there was today if we just sold them. Anybody go to sale Monday, watch any calf sell? Anybody actually pull up a computer screen and see what's happened today? Was it green or red or Christmas-y, both of them or what? Red. Kinda red, huh? It was green till 12th, 13th. This market is volatile. She's up in the morning, down the afternoon, down three days, up one day. I'm talking about the holiday hours and I said, for all I know when I was third talking, they could be down two dollars. It wasn't down two dollars, but it went down two dollars from the high of the day. But in making projections, you gotta have some feel for what you think you could get your calves. And we've got some people who have had on-farm buyers buy their calves for years and years and a couple of them have told me they won't commit and give them a bid. Well, you can always take them to an auction, get a bid. So we're gonna look at what auction prices. Have we sold enough calves in North Dakota to establish a market yet? This is last week, Tim provided me this summary. It's of KISS, Napoleon, Stockman's and West Fargo. Damn, your 10,000 calves sold last week. So we're starting to test the market. We're getting some localized values. These are the prices broken down by weight increments, 350 to 380, average 373, 143. This is all four markets grown together. So that was steers. This is halfers. And here I've just made it a little more readable. I wanted to see what these different weight classes were trading for. If you had 428 pound steers, they average a dollar, 36 a pound, $582 a calf. What's it cost to raise a calf nowadays? Hopefully less than that, but I doubt it. So then we go up to 528, $1.28 average price, $676 per calf. And that meant the extra 100 pounds you put on from here to here was worth 94 cents more. So if you can put a pound on for less than 94 cents, probably should feed it, shouldn't you? If we go up another 100 pounds to 618 pound steers, $1.21, 748. You know, we can still get $900 calves, but they're gonna have to weigh a bunch. The value of added weight is around 90 cents a pound. Heifers are selling at a discount in the fall like heifers always do. It's pretty consistent. The discount between light heifers and heavy heifers is about 14 cents. What will that discount be in February between the heifer and the steer? It'll probably shrink to less than 10, but there'll still be a discount. At finish, when they go to slaughter, what will be about zero then? So we got that to consider our spreads and our heifers and our steers, and we got our weight classes of cattle to think about which weight we can wanna feed or what they might be worth. In any of these weight classes, whatever, there are some pretty known value-added strategies that help you, market your calves. Load lots, load lots of uniform cattle. Well, some of us have that, some of us don't because of the scale we operate, but we can try to maximize it by managing a calving date or our breeding program. Two rounds of shots. I know people say they didn't pay him for his shots. I got it in the highest market and I didn't give mine any. There's exceptions, but generally, two rounds of shots gets you more dollars. Let's just go back to the market report. Okay. Who might as well give mine to? Yeah, go to the 550. Steers? Yeah, go to the 1085 you see down there. 124, okay, it's right there. That's the average. To 130, that is. A spread. $650, $750, that's $100 spread for the same calves and the same markets, the same date. The top is for the reasons John said and the bottom is for the things that work. Okay, so I'm said you want to be at the top of that range in those averages? These things we know do that. Now sometimes the things on the bottom do that. Natural source and age verified. I haven't seen as consistent of buyer interest paying more for some of that as they have the top things. So one of the things in there is weaned over a month. Now you can wean them in the market, it can crash in the month you're weaning and you lose out on it. But generally if the market's kind of stable, once they've been weaned for 45 days, there was worth more than a balling calf. Price per pound, same weight. Now, so we gotta talk about what they're worth today and we're gonna do some budgeting and planning. I'm gonna use that number, that market report, some of those values of added weight gain as my starting point. Then I gotta figure out what they might be worth later after I've held on to them for a few months, after I've made them bigger. And we can use the feeder futures as a little bit of indication of what our industry speculating and trading think they might be worth down the road. This is a basis of 800 pound steer. So if we're not gonna have 800 pound steer, we're gonna have heifers, we'll be back some dollars. If we're gonna have lighter calves, we'll be plus some dollars for the spread. So let's go out here to January. Get them past the first year, they're trading at 117, he said it might be down today, a couple bucks, maybe it's 115. That's a planning price for us to keep in mind. No, that was 117.7. Okay, well that's what it was Monday when I made this chart. It went up and went back down to, of course, again. Now we get out here in April and further out, I said the trend for cattle is not in your favor, because where are we going? We're down a few dollars, longer we go out. Does this mean this is what these calves are gonna be in April, January or March? Nobody knows, but we got people speculating they might be there and these are prices that with some strategies you can kind of lock in. At a cost, you can lock those in. I'm gonna use them for planning my budgets. Okay, in a budget, we have direct costs, overhead costs, these are the kind of costs I'm gonna assume and put in there. I've got the same feeds Carl was talking about at the same prices, so my rations are based on what he was just sharing with ya. And my conversion, so I can get a feed cost per pound a gain, I'm gonna put in a few other costs besides feed. This is your home raised calves, I'm gonna make you not charge full yardage, you're gonna donate some labor to this enterprise, you're gonna donate some use of depreciation of your facilities, but you're gonna pay your electricity and fuel bill, okay? Now if you were doing it for somebody else, you wouldn't donate anything to them, you'd charge a higher rate. That would be full yardage cost. And I have an example of where some doing cat work for you, custom feeding, that's 40 cents. Just your own to cover some direct, 15 cents. I got interest at six, I got 1% of them dying. I got the average cost of a vaccine and a pour on and some antibiotic for the ones that got sick averaging 10 bucks a head. Now I only got a little bit of marketing and trucking cost because if you had to truck the calves off, sell them at weaning, you got a trucking and marketing cost. This is a little added because you got heavier calves to truck and a little more gross value for a little more commission. So I've just put in a partial addition for that, okay? Then I said, well, what am I gonna budget? Everybody's got different calving dates, different kinds of calves, different feed. I'm gonna pick a few scenarios because there's so many you can come up with and you'll probably have to do your own to figure out what's gonna work for you. We can feed heifers or we can feed steers. We can have light calves that we carry on and feed or we can take heavy calves and feed. We can feed for a high rate of gain like Carl was talking about that cheapens up our feed costs or we can drag him out to a grass market. We can feed all winter, we can feed for 40 days. So I picked a few scenarios to make a few budgets to give you a kind of a representation of how it looks for doing some of this stuff. This is what I call the traditional steer backgrounder. He's got October 24th yesterday when I did this. He's got 570 pound steers. That about what a lot of cattle would weigh. I looked at that market report, I said they're worth a buck 25 a steer. I am gonna feed him for 2.3 pounds a day gain. That's all I tend to get in my backgrounding program. That kind of realistic for most of you when I look at what a lot of backgrounders do, they're low twos. And then I say we're gonna feed him up to the end of January to 770 pounds. We're gonna put 200 pounds on him. It's gonna take us 87 days, 200 pounds of total gain. And that animal would have sold for 713. I added 114 worth of feeding costs to it. I got a 37 cent feed cost to gain. I got a 66 total cost to gain. I said those pounds of gain are worth what? 85, 90 cents. It's cost me what? 66, this should work, shouldn't it? I said it did work, $56. The break even was a $1.10. And when I went to that futures deal, it said 117 for January. And so I got some money. So if you believe that's how it could work, you might want to background some calves. Well, I thought, Tim said, do you want me to share with you my sensitivity analysis table? I said sure. And so what were we talking about? 125 calves, 117 outweights. I had 57, what did he have in his table? 55, two great minds thinking alike, maybe, huh? But he also showed in a table like this, if you could get a dollar 30 for that calf and that market was only gonna be a buck 10, not a buck seven, what happens pretty quickly? Shift either one of those a little bit, one way or the other, and we start to go out of the black zone into what zone? Losses. But for today, this is where we're at. Tomorrow, I'm not sure. Somebody said, 570 pounds steers, what kind of runts are you raising? My calves, I already got a calf weighing over 800 pounds. They're gonna average 650 or whatever. So I said, okay, let's see if you got some bigger calves. You got 620 pounds steers. They price out at a buck 21. And you got the big calves that you're so proud of their grow, let's feed them a little harder. Let's put some more of that corn into them. Grow them at three pounds. But let's stop here when we get into eight weights. Let's not go to nine weights because it's too often when you go to nine weights, you come home from the deal and said, geez, I put the last 100 pounds on for nothing. The 880s are bringing more than the 950s. So we're gonna say this is good growthy calves that are capable of going to eight and eight pounds. We're gonna get them out the end of January. Total gain 260 pounds, animal started at 750. Yada yada, same thing, Carl, said you feed them harder and faster. Your feed cost per pound of gain goes down. Your cost of gain goes down. What happened to our profit? Went up, that's a good plan. Good growthy calves, take care of them. Keep them on track, get them to the April market. What could be the fallacy here? What if they said, your calves are 880, but they're short and dumpy and their briskets are full of fat and they waddle? We ain't giving you a buck 11 for those kinds at that weight. So if you don't have the right kind of cattle to take it, you should probably background it a lower rate of gain. But we got a lot of these cattle in North Dakota that can take it, too. I said, well, I know the market stinks today. If I can just wait a few months, I couldn't come back. But I can't feed, so I'm gonna hire someone to feed for me. I'll take them over to this lot. And he's gonna do a pretty good job with them. In the short feeding period, he's gonna average a nice gain. Only 55 days, taking them from 550 to seven. They're gonna be out here right before Christmas. Nice Christmas money coming in. But our lot charge went up and our ration cost went up because he's probably not gonna sell you his feed at cost to raise. He probably wants a little more margin. And he's not gonna donate some depreciation on his facilities. He's gonna want full yardage. So we have a little higher break-even, a little higher feeding cost. It was still profitable, but not as profitable. And then we have another scenario. Anybody read Beef Talk that Dr. Chris Ringwall writes, shows up in most papers? Okay, he says, go to June calving, May and June calving. Wean your calves in December. Hold them over a winter on hay or forage and go to grass with them the next year and then go to Oat and Pea and cover crop and then put them in a feedlot and finish them. And you can make a lot, a lot of money doing it that way. So I said, I don't know. These guys don't probably have the pasture to go do it with next year and they probably aren't gonna go to finish, but let's just take it through the backgrounding phase. Let's wean them not in October. Let's wait a little later. Leave them on the cow. These are late born calves. And they're not gonna be very big calves because they're late born. And we're gonna feed them all winter long. Not 87 days, like 165 days. I forgot to change something. And they're not gonna be done here in this budget till May when grass time comes around. Our feeding costs are fairly high because we're doing it a long time even though we're using cheap feed, $60 ton feed. How'd that pan out? Well, you didn't lose money, but if you could make them really profitable next summer grazing them, you'd say, I just bought time to get to the profit window. But if you're gonna dump them out at this point, you probably should have done a little faster backgrounding. Comments on that? Wintering them usually gotta make your money. If you winter a calf, green, either this has to be a hot grass market, grass fever, or you gotta graze them yourself. Yep. Well then, in this area, it's pretty cold because you're 20 and 30, you're wind and all that. You got 1.5, I don't know how to go out without having pollen in the center of the pond. Yeah, well actually what they did with their calves, and that's what these costs are based, they put them in some standing corn with a hay bale. So they picked some corn out of the field too. But their cost was 154 for their feeding period between some hay and some standing corn. So I just made the numbers come out so they came out to what their cost was. Or they had to do it when they were grazing in corn. Yep, they were grazing in the corn field with hay bales. Yep, unharvested corn, not stalks, standing corn. But what it is, is you got a 72 cent that cost the gain over a whole year for that much gain, it doesn't leave much profit. Well, then I did some heifer budgets. Here's a very typical heifer budget, two pound a day gain. Like the steers I had at 2.3, a lot of times those heifers will barely do two when your steers do that, 78 bucks. Got my heifers priced at $1.04. Well I think it was $1.11, now this fall, income next March, we've carried them through the winter at two pounds a day gain, and they sell them at a dollar four. That's, you know, 10 cents back from the steer at that time. I don't know, is that a realistic number to put on them? Projection of a heifer, 10 cents under a steer at a yearling stage? So, how about if we didn't put quite as much into them? We said replacement heifers only need to gain 1.6, they don't need to. Well, we're putting in less pounds if we're selling feeder cattle out of this, they actually return less. They cost less to raise, if they're going to the cowherd, this might be what you wanna do, but if you think you're gonna turn them into the feeder market, you've cut your profit in half by maintaining them as a replacement that has no value as a replacement. Now, some years we have tremendous values replacement. I don't think so much next year. Anybody heard what bread heifers are selling for? I think it'll take the interest out of breeding a bunch of heifers this year. Then the late weaned heifers carried on hay. Everything was positive, but there was quite a range in positive there from feeding scenarios. I mentioned we don't know what the out price is gonna be and I'll turn it over here about at this point so Tim can pick up, but one of the tools we have is either buying put options or buying LRP price protection contracts which says we are guaranteed a certain price for a certain premium. And that's an added cost out of these budgets that I didn't have. And if we look at what some of those premiums are, this is expressed in dollars per hundred weight for these 700 or 800 pound animals. You know, it's significant. It's $35, $40, $20 to $40 depending on what kind of level of price protection you're having. So that's one of the other things we have is a tool to help protect. And that kind of concludes what I got. So I know Tim's here to pick up on some of this price protection and- Just go back to the market report once and kind of substantiates it. Okay. The market review. Yep. And then we'll come back to that. Yeah, one more, one more, one more. Okay, there's steers. John mentioned fleshy. Don't get a few fleshy ones right there. It's, you know, Mehdi, 850 said once they're fleshy they take them down well. Yeah. Take five bucks off them. And the other thing, I agree with everything. We didn't reverse this although we did talk over five minutes I guess or whatever. Anyway, and the other thing is, yeah, look at here, 124, 125, but, you know, come here, come down to 750s, 125. John was talking about that. Why the higher price? Well, it's just because of the, you know, get them to get the market by April. May, fine, if not, today, April futures were 104, and June futures 95, 96, so we know $8 down. So that's why these are selling a lot, relatively a lot better to these. This is all, everything John said is outstanding here. Okay, yeah, and then pull ahead to the LR. I think we probably want to. I think we want to get to any questions. Any questions, but yeah, just go to the LRT, how many have done options, feed of cattle options, okay? They like the way they work, these are the users. Don't like them? Oh, there, they work all right. I mean, some years they look good, and others they don't. How many have used LRT? Anybody? Yeah, okay, this is one. This is the heavyweight steers. Yeah, yep, today, I got the new ones. This would be good till nine tomorrow. And so the end date comes up to January 24th, or you can go to February 21st or March 21st. But anyway, the top one for January 24th, today you could have got a 116, but it would have cost you five bucks. Five bucks a hundred, 40 bucks an animal. This, there's a subsidy here, so you, there's a 13% subsidy, so multiply this by 0.87, which I already did for this one. So right now, you could get a 116, it would cost you, yeah, a 496, five bucks. Or you could get a 114 today, it would cost you four dollars. So you're at 110 net, or you could get a 112, it would cost you 350, okay? Or you can jump to February 21st, you could get a 115, it would cost you six dollars. Or if you're a beginning farmer, so you have five years of less, finally, well, as long as you're in college, or if you haven't filed a income tax for more than five years and some others, you double the subsidy, you just, you've got a 13, you do 23% subsidy. So it'd be another dollar, well, yeah. Another dollar off of it. $20 is another dollar, obviously it'd be out of that top of it for six and a half years. So anyway, yeah. So you're going to have a projected $80 profit, but you take 25 off it and you kind of protected yourself. So that's what LRP is. The nice thing, Peter Count Futures contract is 50,000 bucks. Here with LRP, you pick the number ahead you want to do, your steers or heifers, you pick the number ahead, so you can do, I'm going to do a hundred head, maybe I want to do 20 head of steers. So maybe try to ratchet it around and do that. However, when you're locked in, you're locked in until the end of the fall off. The other thing, John kind of alluded to it, but from a basis standpoint, again with the November Futures and all subsequent ones now, we've changed, like John said, up to 50 pounds, so it used to be 650 to 850 and now they're seven to nine late. So theoretically, we went back and looked at how much that lowers the price and it lowers it above $3. So in essence, theoretically, you could add $3 to what you thought was a basis before. A lot of times along the 990, and again, we saw that wide range of prices for the same market taxes, so you have to consider that. I know you're all on the top of the range, so that's good. But anyway, the 994 markets where the USD reports is what we have here now, the 992, I said you've got probably, they've taken leave. The 992, I said you've got probably at least $2 off of those prices there. I don't know, again, it all depends on what you're at. So I don't want to mix you up here, but along the 994, so in the past years, for that average of the 750 to 8 weights, we've had about a par basis, okay? About even now, about the same. Up here, probably a negative two basis, so the average of 750 is now, at least theoretically, since we lowered $3, before you had a par basis before, theoretically, that should be a plus three. So up north, we should be close to par now? Yeah. Okay. Whether that's going to happen, that's all theory, but that's the way that it's supposed to be. Keep that in mind, and you know, kinda interesting. That's been the case in November. If you've been following the November futures versus October, they've been 253, a little more than three until this week, right? And now all of a sudden, the October futures is only steady because we're close to the end of October. When we close out that October contest, that's the state. We ran futures up in the last four days, about $767, and so the November went up. So actually, today, November futures closed at 1.2265, and October was 1.2155. So November was a dollar above the October. So you're plus $3 on that, it's four dollars a month. But anyway, I'm gonna be completely mixed you up and all the time. I have a question for you, Tim, because I read this, 500 to 550 pound, $5 lower. So what were they doing to light calves last week in North Dakota? Five lower, they didn't want them very bad. Seven, 750 pounds, six higher. Don't we have a winter wheat market this year? Does anybody want these lightweight calves? I guess we better damn well feed them because nobody wants them. We have a winter wheat market, and that was our expectations, but it didn't help hold her. Were they dry or what's going on? No, no, we got really good winter wheat pasture. They just don't want to put calves on it, huh? We see what happened, yeah. I was talking about the futures market today, the futures market was up even $2 higher, at least not the October, but the other ones, early day till the noon, and then they went back $2 so they closed about even with yesterday, but they were a $2, but in a half an hour they dropped off the $2. That shows you how fair the market is. One of the things they're looking at the January futures, everybody, not everybody, but people saying, well, man, they get the 120, I might kind of do something so they got the 118.75 and then a half an hour, now $2, so that's what they're facing in the market and that's kind of the funds, you know, we ran them up $7 in the last four days and we hit that point and a fund bales and then everybody bales so they can, anyway, I don't know, I think. Any further questions? There. You know, five bucks a hundred is that based on what you think you can sell on that? Or you're starting, but what are you? Yeah, you pick your ending weight. 8.767.32, they don't, now that's all on paper.