feedlots?

[cowman]

Just taking numbers from the Alberta Livestock reports, on Feb. 24th they listed fats as selling at $85-$89 so say an average of $87? Or $1131 for a 1300 lb. steer?
Feeder steers, listed on Oct. 28th/05 were $1.17-$1.27 at Ponoka, so say average of $1.2225? Or $916.88 for a feeder steer?
Now that works out to a gross profit of $214.12? For 550 lbs of added weight! Now I realize that calf won't be there yet but if these fat prices hold I would think a lot of feedlots are going to be taking a bath...cheap barley or not! Either that or they can feed cattle a lot cheaper than anyone realizes?
If my figures are anywhere close to being accurate and it costs around 60 cents a pound to add weight then would it be reasonable to say the feedlot will have $330 plus $916.88 for a total of $1246.88 in that 1300 lb. steer? For a loss of $115.68 per fat steer?
Maybe the guys who sat this one out were the smart ones?

[wilagro]

the drop in prices in the feeder market right now likely reflects your thinking cowman.

[Horse]

Cost of feed is more like 32cents/ lb And mabey less depending on how many tonne to the acre of silage and mabey if there is a lot of tough bly.As for yardage well I think the range can vary a lot but you know we all live on depreation once in a while.

[wd40]

If one figures his honest variable costs in a feedyard, yardage costs will be closer to .40 than not.

[cswilson]

Just closed a pen of steers and total cost of gain was .52/lb. If you pick up some money on the grid there are still cattle that will work on feed.

[IAMTHEMOLE]

Does that inlude interest? If it doesn't, you could have made money paying down any debt you may or may not have to save interest expense.

[cswilson]

Of course it includes interest-just was pointing out what an actual close out came out to.

[blackjack]

...i did my own little calculation...

...750lb str 600 lbs = 1350 lb
50 shrink
1300 lb sel wt

600 * 72cents/lb gain = 432 917 = 1349 total cost

600 * 52cents/lb gain = 312 917 = 1229 total cost


sold at 1131 dollars

senario #1 = 218/hd $ loss

senario #2 = 98/hd $ loss

...in my opinion if the the market stays like this for the next 3 months ...look for the calves to be a whole lot cheaper next fall...

[grassfarmer]

That's going on the assumption that feedlots are in business to make money on every calf. They are really in the business of selling grain and silage to guys getting cattle custom fed for the most part. If we are to believe Cam Ostercamp (which I do) the Canadian feedlot sector has averaged negative $20 per calf profit over the last 20 years. I read yesterday that US lots had done better - they averaged $3US profit over 20 years! This whole sector seems to be built on the concept of saving people facing large tax bills. All the doctors, surgeons and likely oil men head into December facing paying top rate tax on their huge earnings - buying calves and risking losing a little seems a far better bet.

[grassfarmer]

grassfarmer, they are still limited to the number of cattle they purchase if the cattle aren't their main source of income.

[Horse]

EM how much are they limited to . One of my consultant buddys in the $300,000 range seems to have an unlimited suply of money to lose now I dont know the whole poop on this hiding money thing but I understand you only have to have a reasonable expectation of profit Then there are the t****rs that have 100s of thousands invested in cabins on thier trap lines they dont even trap but whereelse can you get a playground like that at taxpayer expence.

[Horse]

It depends on whether an individual would have shares in a feedlot, then I guess they can buy as many cattle as they choose.
I know that individuals with off farm income that amounts to more than their earnings from the farm are limited to losses they can claim from their farming operation.
Individuals who have non farming endeavors, professional corporations such as doctors etc. would have restrictions as well, particularly if their corporation did not include a farming divison.

[cowman]

I think grassfarmer is pretty much right?
It wasn't just doctors and businessmen who got in on this deal, but a whole lot of farmers?
Don't know if this is still how it is or not but this is how it sure used to be done:
A farmer could borrow $200,000 dollars at prime or slightly above prime from the feeder associations? So he has a good year, maybe sells a slug of canola into a good market or something, and needs to offset some income so he doesn't treat the government too good? Borrows the feeder association money, buys calves in the fall, and puts them in a custom lot? Now when he sells them he can declare the net profit...but he has already claimed the $200,000 as a cost the year before? So he is now obligated to buy another $200,000 worth of calves the next fall to off set the big bucks he got when he sold the calves in the spring? It was great going in ...not so nice going out? What he was doing was deferring taxes? You will find a lot of older farmers who are still locked into this cycle and not willing to send the government the big tax check...that sooner or later will have to be paid!
In reality that has been what has driven the custom feeding business. That is why come late November, early December you usually get a rise in calf prices...it is the tax money coming to the sale!

[cswilson]

We picked up 12 cents grid money and sold those steers at 1.01 so our numbers looked a bit rosier than those projections.

[cowman]

So I wonder when they quote like 87 cents as the fat market, how many cattle are doing better than that? Are large numbers being sold on the grid and how many make a premium on that grid? Do the large feedlots target a grid price? Do all packers participate in this type of sale?
It would seem to me it would be to the packers advantage to just buy them live...no grid?