 I was on this program last year and it was tremendous year. We said prices were as high as they've ever been. Go ahead and sell your calves. Be happy with it. But there's a lot of potential to hold onto them and wean them and feed them. You probably make money no matter how you do it. It's kind of how it worked out. This year is a different situation. It is a bigger marketing decision because the margins are kind of tough and you have to make a decision. Is there enough in it or too much risk to decide to feed them? Backgrounding is pretty wide open. It includes a lot of different things. Basically wean the calf, feed it for a while. That can be as short as 30, 40 days just to precondition it and get it ready for sale as a weaned calf or it could be carrying it clear through till spring and maybe taking it up to 950,000 pounds. So as I look at different strategies or systems for tonight's talk I kind of broke it down into just a few categories that we're going to categorize backgrounding. One is we have different start weights of cattle. Whether it's in your own herd, you have your light weight, mid weight, your heavy weights or whether you're a May calf or a February calf or whatever. You might be making a decision regarding either light calves or heavier calves so I've broken that into three weight groups 450, 550, and 650. And I'm just going to deal with steers, top grade, medium large frame, well muscled steers. Then once you have a certain weight of cattle that you're going to feed you have to decide what feed you have to work with and how much you're going to push them for gain. And from my talk tonight we've broken that into three different levels. Pound in three quarter, two and a half pounds, and three and a quarter. Then of course you've got to figure out what's your market target. When do these cattle have to go to town? When do you want them to go to town? Do you want to just put 100 pounds on them? Well by January we put 300 pounds on them so I also added a third variable and that's the amount of gain in the time we market the calves. So with all those different scenarios I built some ugly tables here I'll share in a minute but we tried to get at what the cost was per pound of gain with different strategies. What your break even cost would be when and at what weight would those cattle come to market and then what we would project for a return per head to do that. But before we can get those tables we have to come up with valuing what these cattle are worth today if we're going to compare what they might be worth some other day with some added cost. And Tim mentioned we have USDA market reports, we have auction barn market reports and we have to get a feel for what they could be worth at the start of the backgrounding phase. Likewise we have to have some expectation of what we might get for them at the weight and time we do sell them and certainly futures markets become some of our guide in planning those prices. So with the help of Tim Petrie I created the next table I can get there in which we looked at the different months better back up now back up because I'm having kind of a laggy advance here I got ahead of myself this is wasting precious time what's that? Here it's coming I said we needed to get some planning prices here they are a lot of numbers on this table if you notice in October we've got these 450 to 5 weight steers priced at $1.75 Tim mentioned these markets are changing fast on some light weights because of some wheat pasture prospects we've got the 500 to 550s at $1.63 $5.56 $6.50 Then you can see using the futures guide futures prices as a guide in some price slides we've got cattle price for all different weights all the way through March up to 950 pounds there is a slight rise in futures prices clear out there and they came up a couple dollars since this chart was put together on Monday but they're relatively flat a very slow advancing computer here the other thing I wanted to take a quick look at before I built these budgets was Tim mentioned there's a lot of volatility corn is swinging 30-40 cents feeder cattle are up 5 down 8 plus 3 and so maybe any kind of feeding program should have some budgeted money there to cover some risk insurance this was yesterday's quote for LRP if you look at the very bottom here on this table it said for weight 2 steers that's the heavy weight steers in March they were trading in the futures of $1.51 we could buy a dollar $1.43 $1.43 a hundred weight price protection for 2.28 a hundred weight so we could buy some level of protection probably in that $15-$20 range we won't be at the money with that kind of premium or that kind of money set aside for risk protection for feed costs in my budgets I asked Carl to provide me some ration costs and some expected performance for different weights cattle and of that these are some of the same prices he shared with you you're pricing the alfalfa at 140 grass hay at 80 corn at 675 supplemented at 500 and they did work out to the lower rates of gain around $152 a ton two and a half pound gains at around $177 and a three and a quarters about $194 a ton those numbers were developed with a cow bites ration formulating program we'll have an example on this slide of what that will do it will actually formulate the ration tell you how many pounds to feed it will tell you what the ration contains it will predict performance so we use that tool to help come up with meeting our performance targets now we'll go in and look at how then I took the numbers for what we think calves are selling for what we think they'll be worth what our feeding costs will be that's web that's interactive on the web there's other ones Tim has one on his extension livestock economics site and so those are tools you can use if you want to play around with your own numbers let's start first with those lightweight calves 450 pound steer calf at $1.75 a pound $787 ahead now you can see some different colored or shaded backgrounds and the first three columns are shaded at $1.75 a day to put on either 100 pounds a gain 200 pounds or 300 the next shaded block is if we feed that a little more expensive ration $177 a ton ration and we only do it for either 100 pounds a gain 200 pounds a gain or 300 pounds a gain you'll notice if we go down there through the pink bar across the middle we have the break even cost for those cattle based on their incoming cost their feeding costs and there's some interest in LRP expense and yardage cost in there I might mention and in all these budgets yardage is only in there $0.20 that's not full value but for somebody on farm doing it that might be what he charged if you're going to a custom feeder it will be at least double that if not more anyways just following those columns down you'll see that growing these light calves at a fairly slow rate a gain did not seem to make any money for the price estimates we used at those weights and at those dates the 450 pound calf kept around to be a 550 pound calf in December 11th would have a break even if a $1.66 mining price we used was $1.60 that was a losing proposition of minus $36 as we got over into pushing the calf a little harder and putting more pounds away on him taking that light calf growing them at 2.5 pounds getting them clear out to February at 750 pounds we found a margin in there where the cost of gain was low enough the amount of pounds we put on high enough and the market rise even as slight as it was resulted in a $1.68 so you can see that's kind of some margins for some different scenarios on the lightweight steer probably more typical for this time of the year would be to consider the 550 pound steer calf we priced him in at $1.63 which is $896 ahead and again we have three levels of gain and we have three levels of 200 or 300 pounds and starting at the first one again didn't matter if we only put 100 pounds on or kept them around and put 300 pounds on that steer at only a dollar or only a 1.75 pounds of gain a day did not seem to make any money if we pushed him a little faster we got into making some money when we put on at least 200 pounds of gain rather than just keeping him around for a short amount of time like 40 days and if we pushed him quite hard and not all calves are capable of this without getting some market discount of being too fleshy and getting discounts we actually found some of those levels profitable particularly if we had calves capable of that kind of gain and staying trim and kind of green the third way to calves that I compared was 650 pound steers and I just eliminated the real slow rate of gain on a big growthy calf like that and I scenarioed it at 2.5 and 3.25 again you can see that weaning and feeding calves on a flat market some initial startup costs and only doing it for 100 pounds of gain is usually not long enough for enough margin to get very profitable or even break even it's when you get in adding more weight by a faster rate of gain which brings down your cost of gain which is included in this table it shows the faster you feed him the more your cost of gain is of course the more money you're spending for calf feed costs are tremendously higher for when you push him at 3.25 versus 2.5 but your cost of gain goes down the market has a slight rise in it and so feeding heavier weights marketing a little later tends to be the most attractive looking scenarios at this time might mention that all these things are so sensitive to a few dollars swing in the price of cattle out and changes in feed cost that this is not marked in stone it probably isn't even good today to use it for planning tomorrow it's a continuing process of evaluating your situation I didn't do heifers but I thought maybe one little example of a heifer budget for people who want to keep their heifers around and keep the flexibility that they might become breeders or take them to bulls if the spring is good and grass is looking promising and rebuilding is on people's minds or to turn them into feeders at that point maybe we could winter the 550 pound heifer at a fairly low rate of gain on a very high roughage ration with just a little supplement and what would our cost of gain be what would our cost per day in feed be and what would a break even be putting those numbers together I have a 50 weight heifer to $1.45 and that's 15 cents under her steer mate that I used earlier and I don't know where those slides will end up but usually early in the fall lighter heifers are discounted severely so anyway I priced her to $1.45 she had a $798 initial value she would come in would break even cost of $1.32 in the end of March at 800 pounds and that would be a $8 break even price so if you're planning to hold some heifers because the slide is too great right now and you think there might be potential for those heifers to actually gain in value through interest in expansion as breeding females that's kind of where it looks like she's going to have to trade come into March and so wrapping up I would just say we have a fairly good look this year things can change, a rally could occur but for planning it looked like we have to kind of anticipate a fairly flat market we have very high cost feed and high cost to gain so the opportunities to make money backgrounding certainly could be related to what you have to value the calf feed or purchase a calf even if you break even on the calf feeding if you have a feed like silage that you're able to market at $65 a ton or price it in as these rations were built on that you'll make some money on the corn a market rally could occur maybe in particular with some of these heifers and I think the feeds that were used in here were kind of your basic standard feeds a lot of people have some opportunity feeds some lower cost feeds and so if you are in a situation where you have some that are drastically priced different than the ones used in the budgets that changes your picture and finally I'd say if you are going to feed it looks like the most potential resides with cattle that are fed to put on at least 200 pounds a gain and fed at least a moderate level of rate of gain with that I've included in the budgets a $15 per head cost to buy some insurance whenever we're feeding these cattle the dollar values of $800, $900 calves $300 feeding cost the risks are quite high and I think that's something that needs to be considered right up front with that Carl I guess that ends mine and I can get out of my slides and turn it over to the next one is there a question out there for John sounds good John I like looking at some of those prices there your issue of marketing salage at $70 a ton really kind of fits in play with that corn deal and you get paid really well for that so it's pretty interesting stuff in my mind