 Hello everyone, today I'm going to talk about backgrounding scenarios in North Dakota We're going to go through six scenarios for backgrounding heifers and steers with some different rates of gain and Kind of look at the economics of each of those situations And what looks like the most profitable headed into the year as we get you know finishing up calf weaning and Harvest and everything else and we turn our attention to should we background or sell right away or after weaning or whatever So the first thing I just wanted to cover really quick is I have three Categories that I typically talked about if you hear me use these words weaned calves Those are going to be 500 to 600 weight calves and that's usually had got the largest price difference between here steers and heifers At that 550 weight mark backgrounded Cavs those are those are going to be 750 to 900 pounds and the price gap from with those tends to fall from that $15 to $20 range to about $5 per hundred weight and then if we're talking about finished cattle I know it says 1,350 on the slide, but anywhere between 12 1250 and 1400 and in that case the price gap between heifers and steers usually goes away And and fed cattle are pretty much priced the same So one thing a concept that I like to Cover before we go forward is when I'm talking about the slide or the price to weight Relationship and this is from 2018, but it but it holds most years And that is that as the price and and everyone's well aware, but this just sort of illustrates it So we're all on the same page You know a 550 weight steer in 2018 anywhere between 175 Dollars maybe 180 dollars for lighter weight per hundred weight or a dollar eighty a pound and then you get to 800 850 weight steers and those were closer to a hundred and forty five dollars So as the price went up the price per pound or the price per hundred weight went down Okay, so the bigger they are the more valuable because they weigh more but the price per pound Tends to fall and that's simply because if I'm a cattle finisher There's less weight for me to put on and less weight in theory or less opportunity for me to make money between what I paid In what I'm gonna sell them for at the end right But that price relationship can change and often does change and a lot of it has to do with the relative price of feed So this chart is dated I mean it comes from 2000 but the relationship still holds and it holds true right now And what this essentially shows is if you look at the line with the red triangles That's a low low corn price. So the low price of corn back in 2000 was a dollar sixty eight a bushel and What you can see happened was the relative price. So it's showing this slope here the price between 550 weight steers or calves heifers or steers And 850 pounds was fairly dramatic. I mean they were from plus $10 to minus $10 so in that case the the the relative difference was almost 20 bucks per hundred weight For those for those animals and depending on What the actual price was whether it was a hundred bucks that could be quite significant maybe 20% in that in that scenario Whereas if you get to $2 and 60 cent a bushel that line flattens out a little bit more So the relative price difference between a 550 weight and an 850 weight animal was was closer So it was more like at this at this price you were looking at about five dollars more five So a ten dollar difference, okay, and then if you increase the price of corn even more So, you know use this as the price of feed the proxy for the price of feed This line gets even flatter the one with the blue Diamonds on it because the price of feed is higher. So in that case you're talking about not that much difference between the price of her pound of 550 weight versus 850 weight cattle not nearly as much as when the feed price is high and the reason for that simple The fact is that in that case finishers are willing to pay producers to put the weight on for them Okay, there's just there's the it's a little more risky for them So they're willing to pay up higher prices for 850 weight cattle and the price of feeder calves relatively is lower because the pre price of feed is higher and And it costs more to put weight on them and get them to finish So that's what you wind up with in that scenario. So It doesn't necessarily what this kind of can show is that it doesn't necessarily mean there's less money to be made when feed costs Are high as long as cattle prices are behaving in this manner to where you're you know You're getting more return on those on those 850 weight 800 weight animals and This just shows the same thing But it shows it from the from the standpoint of fed cattle prices. Okay that when you have Lower lower cost of feed, you know that lines The slope is steeper when you have a higher price cost of feed that line gets more more shallow or flatter Okay, and then finally just talking about some seasonality on prices and this is from an article from beef market central written by Rob cook back in 2020 but essentially what it's showing is that there are months in a typical year and it's not always true We know we know that there could be some some things that happen That they can they can throw this off throw these throw these relationships off But it tends to be the case That February March and April have higher cattle prices than September October August for instance They tend to be lower so if we're backgrounding and We're looking at what the market is going to do headed into spring a lot of times We're going to get a bit higher price Or those 800 850 weight animals are going to be worth a little bit more in the spring than they would be in the fall so when we're looking at fall prices or the price of of What 850 weight cattle are going to be in You know November October that kind of timeframe and we're trying to make a guess on where where they're going to be in the spring By the time they're ready to be sold if they're on feed for say a hundred hundred and twenty days or something the seasonality tends to Be the case that that there's a bit of an increase not not dramatic But but big enough and obviously any increase helps so that kind of can help us with our planning too So as we go through these scenarios, I just want to lay out there clearly what the assumptions are for the prices that we're using grass hay alfalfa hay silage these have all been updated within the last day or so For and and some of them most of them had to be increased compared to last year For instance corn was increased DDG prices limestone salt The yardage costs I increased them last year and then increased them again at 45 cents Which is actually higher than than even what Carrington uses for their yardage Estimates at our at our feedlot facility and and I try to do that just to make sure that that we're accounting for these costs is as close To accurate as possible or possibly even overestimating a little bit just so that when we get the result We can feel pretty pretty confident and that hey, you know this scenario would actually pay Even if there's a few unforeseen costs coming Interest rates had to increase those pretty dramatically. In fact, they're Double more than double what they were last year, which is kind of what's happened marketing and vet costs I've increased those because of the cost of labor increase the cost of trucking has had to go up to Cost of fuel and again the cost of labor and we're still using three percent shrink and one percent death loss So again, these are updated To reflect the current cost and economic environment where we're sitting in All right, so here's the six different scenarios that we're running Steers, we've got a slow rate of gain from 500 to 800 weight And there's the feed cost per day for that scenario a 2.8 pound scenario going from 575 to 855 And the feed cost of $1.76 a day And then a more aggressive ration Going all the way from 575 to finish at 1270 and that feed cost 250 And then heifers two different scenarios our lighter weight heifers going to 750 pounds at $1.33 A little bit heavier weight to start with their weaned weight heifers at 550 to 850 But also at a pound 1.8 pounds per day It's a little more costly because they're bigger to start with on average And then a more aggressive heifer feeding Scenario going from five and a quarter to 805 and that feed cost of course higher also at a $1.74 a day So we'll start with the steer backgrounding and finishing scenario And here's the prices that i'm using for both the the feeder calf coming in because if i'm backgrounding I got to charge myself what i would have been able to sell the animal for Right and then at the same time Then kind of a projection on what the the 800 weight animals are going to be so obviously if we're looking at This 550 weight, you know right around 200 bucks on average and this was pulled monday november 7th Was when this was pulled And and and the live cattle price by the way is a dollar 55 $155 per per hundred weight for the summer of 2023 since that's about when they would be be ready So here's our 500 to 800 pound steers scenario with a 1.8 pound Rate of gain and that dollar 41 a day to achieve that and you can see what the ration looks like there with grass hay some silage ddgs and some salt And um in the next slide i show the table That animal would be on feed for 167 days at that rate to get from 500 to about 800 pounds The projected selling price for a calf that weight is 184 50 And the beginning value was 214 dollars at 500 pounds. Here's the shrink feed costs The interest rates at 7 percent in this case are lot cost being 45 cents per day And then trucking a dollar uh dollar 50 and in this scenario we come up with a a profit We're actually a loss of two dollars and 26 cents per head. So basically you're breaking even zero for all intents and purposes And the reason for that is because of these higher overhead costs and yardage costs are a lot of costs um The the animal being in your lot for 167 days It just eats away at your profits For too long and you're not making enough money on the amount of weight you're putting on because the yardage fees are just eating away at it For too long at 40, you know, because you're paying 75 dollars and 15 cents yardage on that on that animal And so it just tends to eat into the into the profit when you're keeping it out there now And you can get feed down a lot lower than a dollar 41 a day And still Do it in 167 days then this might start making some sense. But at at at that rate You're basically breaking even Now the 2.8 pounds a lot more aggressive ration. We're putting on another an extra pound a day We've got to put some corn in here ddgs as well with the silage and then a grass legume hay So that's a dollar a dollar 76 per day. Okay So in that scenario that animal's on feed for 100 days So quite a bit shorter period of time because we're putting on weight faster to get to 805 pounds The prices for the incoming calf and then the sold calf are about the same And the feed cost again is is higher But we don't get eaten away at by yardage so much and instead because we're on 100 days It's 45 bucks instead of you know 70 80 dollars because they were on feed so long and in this scenario we're coming up with uh, $58 per head or 58 cents per day profit Because we're because we're we're putting on the way faster and yardage fees aren't aren't hurting us so much So in in in essence, we we are able to generate a profit backgrounding steers from five and a quarter to 805 Okay Much more so than this 1.8 pound scenario that I just showed before Mainly because the the yardage fees aren't aren't so prohibitive And then our final steer scenario 575 pounders to to almost 1300 at a really aggressive ration of 3.8 pounds And that total cost is two dollars and 50 cents per head per day to feed So we run this scenario And the projected selling price is lower because we're going all the way to finish But it's still pretty strong at 155 dollars per per hundred weight looking at the futures price And so even with that two dollar and 50 cent Cost to feed per day per head and then our lot costs our yardage is still the same 45 cents and everything else remains Uh, we're we're actually projecting 112 112 dollars and 50 cents 112 49 per head Um, mainly because we're doing that aggressive ration and relative to our yardage costs our rates a gain per day Are are pretty high Okay, so yeah, they're in a lot 183 days and yes our lot cost comes out to 82 bucks, but We're getting up there a lot higher in weight a lot faster And so we're we're able to to overcome the the yardage costs in that case So the next we'll go through uh three different heifer feeding scenarios And these are the prices as of monday november 7th. Okay, so just a few days ago And and you can see so when I pull the weights or pull the prices I pull them for you know You look at the average for that weight and then what what they're selling The sell sales weight if it's you know 800 pound it'd be about 172 170 bucks not much difference between those So our first scenario 450 pounds to 750 pounds at 1.8 pounds per day That's a cost of a dollar 33 Not feeding much corn mostly ddgs some grass hay silage And we come up with a A The animals on feed for 170 days to get to that weight because of the slow rate Selling at 170 beginning value of 193 um Feed costs of a dollar 33 the yardage cost trucking everything's the same as our steer scenarios We come out with a profit of two dollars and 22 cents per head Again, the biggest reason that it's that it's not a whole lot above break even that it's only 22 bucks really Is again that yardage costs We're we're we're spending 76 50 on electricity and fuel and everything else And we're just not and it's taking a long time to get to to get to the weight that we that we need Whereas the other scenarios again are doing it much faster. Maybe half the time And so we're not getting eaten up by yardage So the next scenario is the same rate of gain But we're starting with bigger animals and ending with bigger animals So we're going from 550 to 850 a little bit more expensive because they're they're larger coming in dollar 44 per day Not feeding any again any corn in this scenario, but 1.8 pounds average daily gain And it's not a whole lot different than than the scenario before they're on feed a little bit Shorter because they they they come in a little bit heavier But at the end of the day, we're only making 17 dollars and 34 cents per head So very similar to the previous scenario The price the relative price differences are similar So it would it stands to reason that if you're only going to put on 1.8 pounds the only way you're really going to see a big Some value added to to what you're what you're trying to do Is going to be in the form of you got to get feed costs lower than our estimate here at a dollar 44 per day You probably got to get that down 20 cents somehow which may not be so easy to do because feed costs are staying Pretty sticky and kind of stubbornly high right now And then we can't do anything about the yardage so much Now here's my more aggressive heifer feeding scenario Instead of 1.8. It's 2.8 pounds per day going from five and a quarter to 805 Again, it costs more in feed at a dollar 74, but they're not going to be in the yard nearly as long And you can see that we go to 90 days on feed We're selling them at 802 pounds the projected selling price similar The beginning value similar just slight differences based on the the exact weight And our feed costs are higher, but look yardage down to 40 bucks And as a result we're we're making almost a hundred dollars per head Okay, 96 98 dollars 98 75 per per per animal And so what we here here's a chart that essentially breaks it down for the most part and Each one of the scenarios that was run And it kind of sums it up nicely. I think And and and it's a similar story that we see most years That the aggressive feeding the the putting on weight fast Those scenarios tend to pay the most mostly because of that overhead cost Day after day, I mean as far as overhead goes it's It's the same whether I'm putting on a pound and a half or three pounds a day I mean the overhead the the energy that kind of stuff. It's the feed that really that really changes The feed cost that is and if and if you're able to achieve those even with the higher feed costs the higher rates of gain Then you really Eliminate that overhead costs or not eliminate it, but drop it to such a low Amount relative to the value of the animals then that's where you see the profits happen. We see it here At 1.8 pounds on steers for instance The price differences for 500 800 525 and 805. They're really not that big But what you wind up getting is a much higher profit Because you were more aggressive and and cut down on those yardage fees because of how long they were in there Same thing with the heifers 2.8 pounds All of a sudden now it's 96 75 or is it 1.8 pounds? It almost doesn't even matter that much where they started or finished You're looking at almost almost 20 bucks ahead basically So we got to put on the weight quickly And that's what these scenarios are showing and they're also showing that even with higher feed costs because of that more Flatter slope on the price slide. There's still money to be made out there. It just has to be done With aggressive feeding So some concluding thoughts on this There's a strong incentive to background calves this year As cattle feeders have put a premium on 800 to 900 weight calves And due to higher feed costs and buying weed calves through finishing Backgrounding heifers tends to have two advantages and this is true just about every year You close the price slide gap between steers and heifers up to about 850 pounds And this year putting on the weight is the profitable way to go holding on to them for a long time and trying to You know get there, but Holding them in the yard forever. It's it's just not nearly as profitable More aggressive rations are much more profitable than than a slow rate of gain as I've said numerous times already And this is due to those higher yardage costs that we're having to pay this year And then the most profitable scenario is backgrounding heifers at a high rate of gain In terms of the amount of money per day that you that you tend to make So I want to thank you for listening Hopefully you got something out of this or or gave you some idea on what what you can expect for this year Good luck, and hopefully hopefully this winter is a A lot more mild and we're able to continue to put that weight on and and not Not be you know Dealing with some of the adverse weather conditions that it seems like we always have to thank you