Topping the market

I put down the phone after a lengthy conversation with Ron Hale, an analyst for Professional Cattle Consultants, about the premiums paid for feeder cattle.

He looks at millions of head of data. He crunches numbers and he knows a thing or two about this feedlot business. We’d talked about which cattle deserve a little extra in the auction ring and about how hard it is to correctly identify which ones really are worth more. That’s all covered in the article I was interviewing him for ( “Market-toppers need proof”) but this quote resonated long after that call:

“That doesn’t mean feedlots don’t buy poor quality cattle, but when they do, they buy them at a discount.”

Huh, sounds like the perfect comment to back me up on this one:

Myth—Feeders just pay their target price for cattle, whether they’re worth more or not.

Fact—Feeders and order buyers are constantly making decisions of value based on how they predict cattle will do in three main categories: gain, grade and health.

That particular PCC work that Ron and I were discussing showed four quartiles, ranging from a “heavy discount” group that averaged -$20.90 to a heavy premium at $12.37.

We know there are various traits that fetch more at the auction barn, like health, muscle tone and breed type. Researchers across the country have studied this, and we’ve written about it again and again.

We know about the advantage that known Angus genetics have over their counterparts because we’ve got an ongoing “Here’s the Premium” study. The last data collected in fall 2010 revealed Angus steers brought $6.32 per hundredweight (cwt.) more than their non-Angus counterparts.

But rather than tell you what we know, let Tom Brink, with one of the nation’s largest cattle feeders, tell you what he knows. What type of cattle do they pay more for (and why)?

May your bottom line be filled with black ink,

Miranda

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