 Tim corn prices have increased significantly the last two months and calf prices are above last year So some producers are questioning whether to consider backgrounding this year. What really is the situation? Okay, yeah corn prices have increased about two dollars since their lows of around 350 the end of June to about 550 now and in fact yesterday's prices Actually December futures got up to about 570 yesterday before coming down are the highest that they've been in two years and so You know Corn prices are substantially higher what happened there is when we started out The summer it looked like we're going to have a record corn crop in USD It was predicting about a 13 point four billion bushel crop and as we got into some weather problems In particular when we got into our early harvest in the southern corn belt here in the last few weeks It was obvious that we had disappointing yields and they kept lowering and lowering the Forecast and so now the last forecast was 12.7 billion bushels Which is off the record and will mean shorter corn supplies for sure and with the ethanol demand continuing to go up and Export markets continuing and so on we're going to have just going to be faced with higher corn prices cattle producers have watched with a lot of concern and And rightfully so because we have a rule of thumb change corn prices about ten cents a bushel change fall calf prices About a dollar in the opposite direction And so certainly that has been a concern for us and calf prices have been declining Seasoning like they usually do this time of the year into the heavy marketing period But corn prices along with that have kind of been the consternation that we've been facing so The good news is that the calf prices are still about 15 percent higher than last year And that's due to smaller numbers and then a strengthening Fed cattle market It has been bolstered by the export market although the domestic market is still kind of struggling so with the corn prices Can backgrounding cattle still be profitable? well, that's a good question and it's a question that we get every year, so it's nothing new and Every year there's no pad answer and there isn't this year, but the short answer is yes It can still be profitable even with the higher corn prices Typically we do background a lot of calves in North Dakota and I don't see any reason why it should be any different this year They say that every black cloud has a silver lining and This year of course the black cloud has been this increasing corn market that is affecting feeder cattle market But the silver lining is that with these higher cost of gains feedlots are wanting to buy heavier weight cattle and The higher corn goes the narrower the spread between the lighter weight the 550 to 6 up to the 750 to 9 pound that spread narrows and So they're actually willing to pay relatively more for the heavier weight ones, so that actually favors backgrounding programs and So any way that we can add pounds To calves cheaper than they can do in the feedlot where they're giving them a heavy corn based ration Would be profitable and Also some more good news here is that in North Dakota. We just have plentiful forage supplies this year Excellent hay crop our hay prices are the cheapest in the U.S. We have an excellent corn silage crop A good feed barley crop and feed barley prices are cheaper relative to corn and Some producers may be able to utilize that and then also we have a wide variety of feed Co-products available some of the other speakers are going to discuss how we can use these feed products in the in the rations and how we can cheapen down a ration and put gain on them, so The key is of course for us to do some penciling for producers to pencil it out See what their costs aren't expected returns I have a backgrounding budget on my website and actually Carl Hoppe is going to be discussing tools of producers and used to Figure out their cost in return and projective backgrounding indeed can be profitable Okay, so what is the price outlook for calves and background feeder cattle well has with most markets We have good news and bad news and in this case I guess we have good news bad news and then and then I'll end up with even with some more good news the bad news is that That calf prices have been declining and will likely continue to declining but the good news We've mentioned before is that cattle prices calf Peter cap price about 15% higher than last year Again, we don't know what the corn market is going to do, but they should be Continue to do that the 750 to 9 weight these heavier backgrounded cattle Usually do see a seasonal peak in late august early september and then decline about 15 to 20 in the february march when the heavy marketing starts but This year we that that seasonal peak was right on schedule the end of august We've declined already about 5% but there's some indication that we won't go down This is the ending with the good news that we won't go down that full 15 to 20 percent that we usually do although we could but The futures market actually is showing a counter seasonal strength this year futures are about one to two dollars above The the spring futures are about one to two dollars above what the fall futures are And uh, we expect some improvement in fed cattle prices Hopefully some improvement in domestic demand in the export market Continuing so uh, hopefully that you know, we won't see as much a decline as we usually do again on my website I have historical seasonal cattle price charts. I have corn and feeder cattle prices on the same chart showing that relationship and And also some projections of what I see prices doing and what about price I'll look for heifers Okay, well, yeah, I haven't mentioned much about heifers and yeah We usually do background to quite a few heifers in North Dakota and I think we ought to continue to to do that The nice thing about heifers is we have two markets for them in the spring We can go to feedlots with them or we can Use them for replacement heifers and turn a bull in with them and And last year that replacement heifer market was a very very nice market getting up to as high as steer even above prices for some of them So uh Another thing that favors heifers is that the heavier weight we get heifers The spread between steers and heifers narrows down and that favors backgrounding and and we do have very good pasture and range conditions in the u.s This year and hopefully that will continue and we've got a lower cow herd here the last three four years And so it looks like the demand could be there for heifers again So I'd certainly think about heifers as well. So what about price risk management tools? How should we consider these and we're talking about background? Okay. Yes Whenever we have a volatile market, I think we ought to consider price risk management And we do have that volatile market that we talked about even just the last two weeks Two weeks ago during the week corn went down about 65 cents last week It went up about 80 cents with these usd reports continuing to come out And so we're going to continue to see volatile prices Until we know the size of the corn crop and the use and so on and likewise other factors as well affect feeder cattle prices And so, uh, I think price risk management is is something we really really ought to consider for those interested In and actually that have experience in futures and options market. I think that's something to consider Uh, other producers may want to consider directly Contracting with a feedlot and then they lock in their price and and know that it works quite well Another new tool that we have and this might be especially appropriate for producers that have limited Experience in price risk management is a new tool called a livestock risk protection lrp It's sold through crop insurance agents instead of futures market brokers And the nice thing about it is any number can be hedged unlike the futures where you have 50 000 pounds And you know, it's it's it's that way here We could do any number of head and you go through your crop insurance agent Which producers are typically used to working with anyway. So just another thing to consider Uh, again, you need to know more about it and on my website I do have information on futures options and and lrp and your crop insurance agent can help you out there too So yeah, I think in these volatile times. We certainly should look at price risk management. All right. Thanks, Tim