 Hello, my name is Brian Parman. I'm the Ag Finance Specialist in the Department of Ag Business and Applied Economics. I work in for extension. And today, as you can see from the title slide, I'm going to be talking about backgrounding budgets and profits. This particular talk, we're going to be looking at steers and heifers, running, looking at several scenarios in terms of average daily rates of gain, so different feed rations as well as fattening or growing them up to different weights for both heifers and steers, using current feed costs and prices as well as current market prices. And so as I go through this, obviously keep in mind that what we're trying to do here is see both A, if there's some money to be made, fattening or backgrounding calves, as well as what is the sort of the optimal scenario and that's kind of what I'm hoping to hit on. And again, this is a lot of these are projections. So when I go through the prices here, we're taking today's prices and just kind of projecting with no real expectation of price movement too much one way or another. All right, so compared to last year, and I gave this similar talk last year on backgrounding budgets and did some different scenarios, but the feed price situation is a bit different this year. For one thing, fall crop prices are much higher this year than they were last fall. We had a situation here in North Dakota last fall where we had a lot of low quality wheat that our farmers weren't really sure what to do with and you might have been able to purchase some of that and feed it at a relatively low cost. Hay prices are slightly elevated for like grass hay, a little bit lower for alfalfa hay and I'll show you that in a minute. Trucking and shipping costs and yardage costs in these scenarios remain mostly the same as last year, not a lot of movement in those costs. And then cattle prices for feeder cattle are a bit higher than last year, but not dramatically. We're kind of, you know, if you looked at prices last spring, you know, we might have been thinking that feeder calves were going to be fairly cheap, but prices rebounded quite a bit. And so this fall, we're kind of in a similar situation where we were last fall around this time in terms of the price of feeder calves. So when you're thinking about backgrounding, obviously, whether you keep your own or you're going in and purchasing them, we charge ourselves the market price for whatever 500 or 600 weight calf that we're retaining because obviously you could have, if they were your own, you could have taken them down the road and sold them and received whatever the market price was. So you got to obviously charge yourself that. So this is the price of corn I was talking about and I just wanted to show a chart of corn prices and this is on a continuous contract basis over the last three years. And this fall, you know, if you see here on the right, is not the peak, the peak was there in 2019, especially the early part of 2019 where we had that $4.50, $4.80 corn for a period of time. We're not nearly that high. Obviously the beginning of 2020 when the pandemic hit for COVID, corn prices went down nearly $3. But here this fall, we're seeing in over $4. And then if you compare it to last fall, it was more like $3.80. So corn prices are elevated relative to last year, that's for sure. So this here is the 2020 alfalfa prices from USDA. They collect average prices and then they rate it premium, good, fair. What you'd probably typically feed beef cattle is going to be in that good or fair range. So our nearest neighbors, South Dakota for good hay, 128 to 180 bucks a ton. And then for fair, a lower protein content, maybe closer to 16% or 14% protein, $103 to $113 per ton for alfalfa. And then we also have Montana here, similar, maybe about the same as what you're going to see in South Dakota. So I'd use those as a proxy for hay prices across North Dakota as these Montana and South Dakota prices which are tracked here. And again, I'm going to show you on the next slide, but alfalfa prices down perhaps a little bit over last year. And here it is, 2019 versus 2020 alfalfa hay prices. Here's November 12th, 2019. We had Montana at $110 to $180 and then $80 to $150 on this end. So again, it's a range, but they're not dramatically different. And then if we look here, and then also South Dakota, $175 to $225, and then this year, 128 to 180. So alfalfa is lower, especially the South Dakota market than what was seen last year. So if you're thinking about feeding, obviously feed costs are a big deal. They're extremely important. So we have a higher price of corn this year and a lower price in alfalfa. And then grass hay. Grass hay prices are similar to last year's prices, but again, they're slightly elevated. For whatever reason, alfalfa is a bit cheaper than last year. Grass type hay is a bit more expensive than last year, but not dramatically. So pretty much your hay costs, I would expect them to be roughly, if you did any background in last year, roughly what they were the year before. Corn on the other hand, not so much with corn prices being as elevated as they are. So here's my cost price assumptions as I go through this is I've got grass hay at 75 bucks a ton. We're going to be using the high end affair to good alfalfa hay prices. Here's corn silage, corn grain at 380 a bushel. That would be, if you're growing it and you're looking at cash prices, yes, I know spot was closer to 420, but cash, you're not going to get that not up here. So 380, DDGs, 160 a ton limestone, bag salt, and then some pre-mixed. Yardage we're charging 35 cents a day. That's what they charge at Carrington. We have this budget online that I'm going to be going through and you can change the yardage if you want to. And you may see other budgets that have much higher or much lower yardage fees. It really depends on how they break out the cost. I've seen some instances where feed costs are included in the yardage. So you'll see this really high yardage cost of maybe $1.50 a day or something like that. Well, if you throw the lump of feed in there, then that makes sense. Trucking at about 75 cents a hundred weight and then you got your vet cost. And I'm just going to use a shrink in death loss of 3% and 1% respectively as we go through here. So six different scenarios, three steer scenarios and three heifer. I'm going to do the first steer one is a 1.8 pounds average daily gain. And we're feeding from a 500 weight and to an 800 weight and then 2.8 pounds on a steer from 525 weight to 805. And then this one we're basically finishing going all the way from a calf to 1270 pounds at a really high rate of gain of 3.6 pounds. And then heifers, we're running two scenarios at 1.8 pound ADG. And that's from 450 to 750 and then 550 to 850. Okay, so that's 1.8 pound and then a higher rate of gain 2.8 pounds from 525 to 805 on the heifers. So I'm going to go through these six scenarios and we're going to look at the profitability under each case. So we'll start with steers. We'll just run through the steer feeding scenarios first. And then again, we'll go through the heifer scenarios. All right, so the prices that I'm using are from the USDA Auctions Summary for North Dakota. So here's the average across the state summary ending November 13th. So when you're thinking about, okay, so what am I going to put in for my cost of a 500 weight steer? I'm going to put them at $167 apiece. That was the average. So if I'm going to background the steer, my upfront cost is going to be $167 per 100 weight. And then when I go to put in the actual prices or the revenue expectation, let's say we're going to 850 pounds roughly, I'm going to use this $139 range. Now, if I'm going to 800 weight, maybe I'm going to use this 128. So if I'm going to 800 pounds, I'd use this 128 at 850 plus, this 139. And then for the finished one, the last scenario where they get really, where we feed them up to 1,270 pounds, I'm going to use this $127 per 100 weight right here. I had to cut this off and attach it because there isn't a ton of these sales. So I'm not sure how strong this $127 is, but we could look around if we really wanted to get more detailed. But again, we're projecting because that animal is going to be on feed for a while. So you could go through with your own budget there and play with that number, that 127, and move it down, say, $7 or up $10, and it would really make a difference in your bottom line. But for this presentation, since we're already doing multiple scenarios, I didn't run that. So that would be an interesting thing to do is once you decide maybe you watch this and you do some thinking on your own operation, you decide, okay, I'm going to background 525 up to 850 pounds steers. I would go in there and play with the expected sale price per 100 weight there at the end and move that around once you decide on which scenario suits you best and see exactly how much prices can move one way or another and you still make a profit or how much the loss would actually be. So here's the 525 to 850 pound scenario at 1.8 pound average daily gain to here. And this is the ration that was put forth. And I have to thank Carl Hoppe for putting these ration scenarios together for me based on what I needed him to do. And so he had it, we've got 10 pounds per head per day in grass hay, 17 in silage, two and a half pounds of DDGs, and then a little bit of salt. And then this comes out to about 88 cents a day for this scenario, okay. So then when I put it into the budget spreadsheet, and there's a lot of stuff, when you look at this budget, there's a lot of stuff below this return to labor management risk. I cut all that off because what it adds up to are these prices in here anyway. So I just, this way it fit on the slide better and you can see it. But I use that projected selling price of $139. My beginning value was 167 as you'll recall. And then we got the shrink, shrink and death loss down here. So weaned at 525 and we're feeding them up to 850 pounds. That animal's going to be on feed for 180 days to achieve that at a 1.8 pound average daily gain. And we basically get a profit of $13 and 28 cents. So that's pretty slim margin there on backgrounding under this scenario here, this 1.8 pound average daily gain, all right. So our next scenario is this 500 pound to 800 pound steer. And we're going to feed them to achieve a 2.8 pounds average daily gain. And we see here that they're going to, again, I have this grass, legume, hay, silage, corn, corn grain, DDGs, and then some salt for about 35 pounds total of feed, 35.071 if you include the salt. And obviously it's going to be more expensive to feed this animal per day at a dollar and six cents estimated cost to achieve this 2.8 pounds. And we're going from 500 to 800 weight. And then what you have here, okay, is so we're starting at this 500 weaning weight. The cost is still about $167. That's roughly what it was for those 500 to 550s. Just same projected selling price because we're talking about that 800 plus range feed cost of $1.06. Here's my yardage. I always have it highlighted, but that's where it is at that 35 cents. So in this case, we're making $72 per head by getting that 2.8 pounds on there. And while we're selling at similar weights and we're purchasing at the similar price, putting on all that weight faster, essentially we get a lower yardage cost. Not in cents per day, but in total cost. Because you see this animal is only on feed for 108 days versus that other one that was on feed for 180 days, right? So then that yardage fee just keeps adding up. I mean, it's 80% longer that you're feeding that animal and the labor and everything that goes into it. So what this is showing is that relative to yardage costs and other things, feed costs, even though corn is higher, are not all that high. They're not prohibitively high. So putting on the weight here is faster, actually pays quite a bit more and you're looking at $72 a head. And again, some of the stuff I'm putting in here for cost is conservative. You might be able to do better given what you're going to have to pay this year. We try to be realistic, but a little conservative with some of this. So again, $72.03. Okay. So this is the finisher scenario where we're going for a predicted average daily gain of 3.6 pounds. This animal, we're going from a 575 weight to 1270. And that animal is going to average 34.4 pounds per day. And the dollar per head per day obviously is quite a bit higher at $1.53 a day. So this critter is going to be on feed for quite a while to get there. And it's going to be a fairly strong ration to be able to achieve 3.6 pounds per day. And here it is broken out on the spreadsheet. And so this projected selling price changes to $127 per 100 weight, so less than the others because he's heavier. The beginning value is a little bit lower because it's in the 575 year, getting close to the 600 weight category. So that's $127 right now. This animal is going to be on feed for 193 days to achieve 1270 to go from 575 to 1270, 193 days. But the profit on this is almost $250 a head. So the animal is on feed for a long time. This steer is, but you're putting on a lot of weight. And so this is again showing that being able to put the weight on right now is definitely profitable. And you're talking about $250 a head profit by feeding this animal all the way out to 1270 pounds at a very hot ration. Now, I don't have this scenario run, but I can guarantee you if you drop this 3.6 to a lower value, 2.8 or 1.8 or something like that, and then he has to stay on feed a whole lot longer, this profit will go down quite a bit. So right now it's showing definitely that it pays to put the weight on as quickly as possible. So then the next three scenarios we're going to go through. And again, at the end I have a table that I'm going to show that compares all six scenarios. So we can look at them side by side as I go through this. But in this, the next three are going to be heifer backgrounding scenarios that Carl Hoppy also put the feed ration together for me. And I'm going to go through the same budgetary discussion with this. So I used that same USDA auction prices for the weekend in November 13th in North Dakota. This is what I have, nothing really over 766 weight. So I have to finish it out there. I'll use that price. And then for the values or the costs of retaining the animal or going and buying them, that obviously comes in here. Quite a bit cheaper than steers right now. The price slide for heifers was pretty severe this fall with a $30, $40 difference between heifers and steers per 100 weight right now. So our first scenario were heifers from 450 to 750 pounds at 1.8 pounds per day. 28 pounds of feed comes out to about 83 cents per head per day and feed cost. So we're putting on 300 pounds, 1.8 pounds per day at about 83 cents in feed costs. And so here's that heifer scenario. And what we wind up with, we're beginning value at 126. I'm using the same shrink and the same death loss. Finished out at 750 and then headed down the road. Sale price at $113 per 100 weight. And we wind up with a profit of about 28 bucks per head in this case. So profitable, definitely always, always better when this is above zero than below it. But not terribly lucrative in this case, where you're talking about barely $30 per head. But again, it's kind of a theme that I'm showing in this scenario that it's lower, but it's similar to the steers. This, these lower average daily gain rates tend not to be as profitable as the higher ones, as you'll see moving forward. But the putting on, and then, you know, this animal's on feed for 165 days. And again, that's where that yardage of 35 cents really starts to add up. So then our next scenario is 525 pounds to 800 pounds. So in this case, we're putting on 275 pounds at that same 1.8 pounds average daily gain. Animals a little bigger when we get it. So our costs per day are higher right out of the gate at 90 cents per day. And then the ration of 32 and a half pounds of feed today with this breakout. So here it is with the numbers that were plugged in there. And this is actually showing a loss. And the big reason for that is that we're only, we're making money putting on the weight and putting on 275 pounds for this long just isn't enough to pay out. And that's what this is showing here. And I think I have this scenario toward the end of the presentation that I'm going to show where we make some adjustments real quick to it. But beginning values about the same, similar. Projected sale prices about the same feed costs a little bit higher, a lot costs the same and 155 days on feed that gets us a loss of two bucks. So we really aren't putting on enough weight in this scenario fast enough to actually pay off is what this is showing. And then our final heifer scenario is 550 to 850 pounds back to 300 pounds that we're putting on the animal at 2.8 pounds per day. So quite higher than the 1.8 before. This is more expensive again per day at $1.8 which should be obvious because we're putting on more weight. And here's the pounds of feed per day and the breakout there. A lot of silage for this in this particular scenario again put together by Carl Hoppe for this talk. But this is our final heifer scenario there. And then here is the breakout of the heifer scenario here and we got 550 pounds to 850. This animal is only in the yard there for 107 days, a lot shorter period of time than the other two. Projected selling price roughly the same, beginning value they didn't change much between 450 weights and 550 weights really and 126 feed costs at $1.8 per day. And we get down here and the profit is about $62 per head. So quite a bit higher profit and getting to that 850 pounds and the explanation is again this yardage fee, total cost on yardage is much lower because we're only at 107 days instead of 150 or 160. And that's achieved by this higher average daily rate of gain. So if you're seeing a theme here, feed costs relative to the value of the pounds that are being put on is still relatively low and enabling us to make a profit. I'm not even messing with prices of fed cattle or anything like that. This is just straight up showing that putting on the weight that right now despite higher corn prices, it pays to put weight on these animals. So as I said, I was going to put together a profit loss breakdown that kind of compared them all side by side. And so here's our three steer examples, 1.8, 2.8, 3.6 average daily gains, the varying days on feed. And then you kind of look here to this column, the profit and loss and the more weight we put on or the faster we put it on, the more valuable and the more profit we make. So you see like this this fed out steer here from 575 to 1270. We're profiting $1.29 per day per head doing that. On the 500 to 800 weight at 2.8 pounds per day, we're making 67 cents per head per day profit putting the weight on. So that's pretty solid. And then this 1.8 pounds is like as almost a breakeven proposition. It's just the animals in the yard too long. The yardage fees are starting to add up too fast. And we're just not putting on enough weight. So then we come down here to the heifer scenarios. And you see a similar theme with the exception of, you know, the first scenario is barely a kind of a breakeven proposition. The second scenario for all intents and purposes, I know it shows a negative two bucks, but that's when you're doing estimates that's pretty close to zero. So these two scenarios really don't help us out a lot. It's not until we start putting on two, three pounds a day or more that we start really seeing a profit. And that's this 550 to 850 weight example, putting on almost three pounds per day. We're netting 58 cents to go up to 850 pounds. Okay, so I think you guys are probably by now getting the theme of all of this, which is that putting on weight as fast as you can pays. Now, obviously there's only so much you can do, but right now that's the theme through all of the scenarios that I ran, whether it's steers or heifers, that it pays to put on weight. Not go cheap or anything like that. Put the weight on, pack on the pounds, and get them out the door as quickly as possible. That's what this is showing here, so that we keep those yardage and overhead costs that you got to deal with labor or whatever else lower. And as I said, I had some scenarios to kind of reemphasize that point. And if we say all else equal, what happens if I keep the 500 weight steer with 2.8 average daily gain to 850 pounds? Before that, we had them down to 800. Look what it does. It actually increases our profit pretty considerably to 108 dollars. And instead of what we showed before, which I think was 67 or something like that, 70. So adding another 50 pounds onto the animal makes sense. And the reason is because this 2.8 pounds average daily gain, we're making money every, quite a bit of money every day that that animal is in the yard at 2.8 pound average daily gain. It's sort of a balancing act. You're trying to figure out, okay, how much is it costing me to have this critter here in veterinary and labor and my own time and everything else. And versus what about putting in the feed and feed costs and being able to achieve these higher average daily gains? And what this shows is that 2.8 pounds, you're making money keeping them in the lot and putting weight on. And the other example that made quite a bit more with putting on 3.6 really pays because you're more than covering overhead and variable costs and every day that they're sitting there in the yard getting bigger, you're making money. All right, so let's do the same thing with the heifer. If we have all else equal, what happens if I keep the 525 weight heifer with a 1.8 pound average daily gain to 850? And I believe it went from a negative $2 to 15.82. So what this shows is 1.8 pounds is fairly close to a breakeven proposition on heifers. We need to have a higher average daily gain than that in order to really make a profit. Yes, 1.8 pounds ADG is above breakeven, but just barely. I mean, the margin is too slim in my opinion to go with that. So I would definitely be looking at trying to get to that 3 pounds per day or better on all my steers and heifers if I'm looking to background them and put some weight on. And right now, all the cost data and everything else in the market data is showing that buyers are willing to pay for weight. That's what they're willing to do when feed costs are low enough that we can put it on and make a profit as things stand right now. So some key points to this presentation. I'll reiterate it again. It pays to put on weight. So the purchase costs for 500 to 575 weight steers are high, but feed costs remain lower or low, relatively low compared to what our market prices are for 800 weight animals all the way up to 1200. So what that says is that there's money to be made doing this. And then, as I said in the last few slides, putting on weight faster is better because it reduces your yardage costs as well as the number of days the animal has to be managed for every pound gained. Okay. So that's kind of the theme here, is put on as much weight as reasonably possible, as fast as possible, and you stand to make as much, the most amount of money from any kind of feeding enterprise. So the other key points is you need to put on at least 300 pounds on heifers. Otherwise, there just isn't enough there to really make it worth it. So you're going to want to, if they're 500 pounds, feed them up to 8,850, 450 pounds up to 750,800. And again, you're going to want to do it as fast as possible, at least that 2.8 pound, let's call it three pounds average daily gain, should definitely be your target. So we're talking about 300 pounds per animal on the heifer side at three pounds per day. That should be our target. And if we can achieve that, all else holds equal. We stand to make a decent profit on everything we retain and put weight on. So that's good news. And it's a similar story to what we were seeing last year that the last couple of years, they have paid for producers to put weight on these animals. And we're seeing that now as well. So with that, I'd like to thank everyone who watched. I have my email address here. I didn't put my phone number because I've been in and out of the office quite often with the stuff going on with COVID and everything else, a lot of working from home. Hence the reason we're doing this virtual versus last year where we did it in person. But thanks to everyone who watched. If there's any questions, you can shoot me an email shown here and I'll try to get to it in a timely manner. Otherwise, I appreciate it. And hopefully next year or here in the somewhat near future, I can start doing some of this stuff face to face. So thank you everyone and have a good week.